Do you have $1,000 to invest in stocks? Put it in this ETF.

There are many misconceptions about the stock market and investing. One of them is how complex it has to be. People think you need to have financial knowledge or spend a lot of time researching companies, but that’s not true. You can do all of this and there are advantages, but It is not a requirement to make good money in the stock market.

A simpler approach is to invest in exchange-traded funds (ETFs) to gain exposure to many companies at once and trust them collectively. If you’ve already saved up an emergency fund and plan to deal with any high-interest debt you owe, here’s one fund you’ll invest $1,000 in without thinking twice. Vanguard Growth ETF (VUG 1.30%).

The Vanguard Growth ETF is a 2-for-1 special.

People typically think of growth stocks as smaller or younger companies. That’s because these companies have more room to grow. But the label isn’t just for companies of a certain size. The Vanguard Growth ETF illustrates this reality. Holdings include only large-cap growth stocks. market capitalization ~ Of At least $10 billion).

Small- and mid-cap growth stocks are great because they have the potential for hyper-growth, but because they are smaller, they are more sensitive to economic conditions and volatility. Large-cap growth stocks can be the best of both worlds. Although high-growth opportunities are available, larger companies are generally more stable due to their established businesses and resources.

The median market capitalization of the companies included in the Vanguard Growth ETF is approximately $790 billion, leading to many market leaders and industry majors.

The fund’s top holdings are well-known names.

Most large-cap growth stocks are technology companies, and the ETF’s holdings reflect this concentration. The technology sector accounts for approximately 55% of the fund, with the remainder comprised of: (As of December 31, 2023)

• Basic ingredients: 1.4%
• Consumer Discretionary: 20.4%
• Consumer Goods: 0.7%
• energy: 1.3%
• finance: 2.6%
• Health care: 7.1%
• Industrial goods: 8.8%
• real estate: 1.8%
• communication: 0.9%
• utility: 0.2%

Looking deeper, Vanguard Growth’s top five holdings are: apologize, microsoft, Amazon, nvidiaand alphabet — Five of the world’s top six listed companies. Together, they account for about 44% of the value of the ETF’s portfolio.

Although you would typically want your ETF to be more diversified, having five of the world’s most successful and promising companies as your fund’s primary holdings is not frowned upon. Amazon’s stock has had its worst performance over the past five years and is still up more than 85%.

AAPL data from YCharts.

Vanguard Growth has outperformed the market.

Investors should want ETFs to have the potential to beat the market. Otherwise, it might be better to just keep going. S&P 500 Collect ETFs and market average returns (not a bad option).

Over the past 10 years, the Vanguard Growth ETF is up 257% compared to the S&P 500’s 175% gain. That’s an annualized return of about 13.5%, which is pretty good for a 200+ stock ETF. Assuming this rate continues, here’s roughly how much a $500 monthly investment could grow over time:

Calculation by author. Portfolio values ​​have been rounded down to the nearest 100.

There’s no telling how ETFs will perform in the future, but past results give some indication of what’s possible. This also helps that the small number of companies that lead ETFs typically have high growth potential. Between artificial intelligence, cloud computing and other technological innovations, the fund’s ‘Magnificent Seven’ stocks could continue to drive growth.

Investing $1,000 in the Vanguard Growth ETF today is a move you can expect to pay off in the future.