1 Unstoppable Vanguard ETF I’m Stocking Up on in 2023
The new year is a fantastic time to reevaluate your investment strategy. With the market in a slump, now may be a smart time to buy.
However, it is more important than ever to choose your investments wisely. If a recession is on the horizon, some stocks may not be able to recover. But with the right investments, you can invest now at a steep discount and potentially see significant returns when the market recovers.
While everyone’s investment strategy will vary, there’s one ETF I’m stacking up on in 2023: Vanguard Growth ETF (VUG 2.34%).
How a growth ETF can supercharge your savings
A growth ETF is a fund that only includes stocks with above-average growth potential. The Vanguard Growth ETF aims to track the performance of the CRSP US Large Cap Growth Index and includes 247 stocks from a variety of industries.
Nearly half of the fund consists of stocks from the technology sector, and the largest holdings include Apple, Microsoft, Amazon and Alphabet. By investing in this ETF, you will own a share in all these companies.
The biggest advantage of growth ETFs is that they are often able to beat the market. In fact, since the Vanguard Growth ETF was created in 2004, it has seen returns of more than 313%—compared to the S&P 500’s roughly 233% return over that time frame.
In other words, if you had invested $10,000 in the Vanguard Growth ETF in 2004, you would have more than $41,000 today, versus $33,000 with the S&P 500.
Why now might be a smart time to buy
When the market is in a downturn, it can be a scary time to invest. But now it can actually be a fantastic buying opportunity, as prices are lower than they’ve been in a long time.
The Vanguard Growth ETF is currently priced at about $209 per share, up from roughly $308 per share a year ago. By investing now, you’re buying the same ETF, but at a discount of nearly $100 per share.
Also, when you buy during dips, you stand to benefit from the inevitable market rebound. For example, say you invested in this ETF in early 2009, at its lowest point during the Great Recession. Over the next year alone, you would have seen returns of nearly 70%. Within two years, you would have doubled your money.
Of course, no one can say for sure how this bear market will turn out, and there is no guarantee that the future performance of this ETF will be similar to the past. But by investing in low moments, it is easier to take advantage of market upswings.
Is this the right ETF for you?
Before buying, some negative points should be considered. First, this fund may be subject to intense short-term volatility.
All stocks will experience short-term declines. This ETF, however, is heavily weighted toward tech stocks (which are famous for their ups and downs), so you’re likely to see more significant swings.
This is not necessarily a bad thing, as investing is a long-term game. If you’re willing to hold this investment for several years (if not decades), short-term volatility likely won’t matter as much. But if the roller coaster ride would cause you to lose sleep, this ETF might not be the best fit.
Also, it’s wise to make sure the rest of your portfolio is well diversified if you decide to invest in this ETF. Growth ETFs often earn higher returns than their more established counterparts, but they are also riskier. With a balanced portfolio, you can benefit from these above-average returns while still limiting your risk.
The Vanguard Growth ETF can be a fantastic addition to your portfolio and with enough time, can help you make a lot of money. By understanding the risks and benefits, you can decide if it’s a good fit for you.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Katie Brockman has positions in Vanguard Index Funds-Vanguard Growth ETF. The Motley Fool has positions in and recommends Alphabet, Amazon.com, Apple, Microsoft and the Vanguard Index Funds-Vanguard Growth ETF. The Motley Fool recommends the following options: long March 2023 $120 Apple calls and short March 2023 $130 Apple calls. The Motley Fool has a disclosure policy.