Not Sure What Stocks to Buy in 2024? Give These 2 Top Growth ETFs a Look. | The Motley Fool (2024)

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By Nicholas Rossolillo–Jan 25, 2024 at 7:00AM

Key Points

  • Two Vanguard ETFs have provided exceptional investor returns over the last decade.

  • Investors unsure of where to start, but who want long-term growth potential, can start with these top low-cost investment options.

  • Motley Fool Issues Rare “All In” Buy Alert

NYSEMKT: VUG

Vanguard Index Funds - Vanguard Growth ETF

Not Sure What Stocks to Buy in 2024? Give These 2 Top Growth ETFs a Look. | The Motley Fool (1)

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These two low-cost Vanguard ETFs have an incredible long-term track record.

After a rough couple of years, tech stocks and growth companies have been heating up again. This is especially noticeable in the Nasdaq Composite, which is up nearly 50% since the start of 2023 -- notching a particularly strong rally to close out the year that has continued into January 2024. Even struggling mid-cap and small-cap stocks (as measured by the S&P 400 Index and the Russell 2000 Index, respectively) joined the party.

Not Sure What Stocks to Buy in 2024? Give These 2 Top Growth ETFs a Look. | The Motley Fool (2)

Data by YCharts.

However, as hope increases that a new bull market is only just beginning, you might struggle to decide which stocks to buy. Fret no more -- here are two top exchange-traded index funds (ETFs) for growth investors that are worth a look right now.

My two longtime favorite Vanguard index funds

The Vanguard Growth ETF (VUG -0.19%) and Vanguard Information Technology ETF (VGT -1.04%) are two of my oldest investments, and I'm still happy to hold on to them.

Let's start with the Vanguard Growth ETF. The index fund's portfolio is a collection of 208 growth stocks, heavily tilted toward U.S.-based mega-cap and large-cap companies, especially in the technology, consumer discretionary, and industrial sectors of the economy. While it hasn't quite matched the total return performance (price appreciation plus dividends reinvested) of the Nasdaq index, it has trounced the broader-based S&P 500 over the last decade.

Not Sure What Stocks to Buy in 2024? Give These 2 Top Growth ETFs a Look. | The Motley Fool (3)

Data by YCharts.

Some of the most powerful and recognizable brands in the world make up the bulk of this fund's holdings.

Vanguard Growth ETF Top 10 Holdings

% of Fund Assets as of Dec. 31, 2023

Apple

13%

Microsoft

12.8%

Alphabet

6.9% (class A and C shares combined)

Amazon

6.5%

Nvidia

5.3%

Meta Platforms

3.6%

Tesla

3.1%

Eli Lilly & Co.

2.3%

Visa

1.8%

Mastercard

1.6%

Data source: Vanguard.

Not all the stocks are mega-corporations, though the smallest businesses in the portfolio are still big brands in growth mode. The smallest holdings in the fund include semiconductor design software leaders Synopsysand Cadence Design Systems, data center operator Equinix, paint company Sherwin-Williams, and Chipotle Mexican Grill, with each stock at about 0.3% of Vanguard Growth's total portfolio.

In comparison, and for those investors who want more focused growth on technology (which really is touching all sectors of the economy these days), there's the Vanguard Information Technology ETF. Again, some of the world's most powerful companies dominate the top holdings. But Vanguard IT has 312 stocks in its portfolio, with a higher focus on software and semiconductors. Due to its sharper focus on the highest growth areas of the economy, this fund has walloped all market averages in the last decade.

Not Sure What Stocks to Buy in 2024? Give These 2 Top Growth ETFs a Look. | The Motley Fool (4)

Data by YCharts.

There is some overlap with the Vanguard Growth ETF, minus non-tech companies (including Alphabet and Meta, which were categorized as communications and consumer goods businesses starting in 2018, the consumer-facing Amazon and Tesla, and digital payments infrastructure providers Visa and Mastercard). The smallest holdings in the fund (many of them each less than 0.1% of the total portfolio) include dozens of small-cap and mid-cap stocks, businesses that could one day flame out, or become new investor favorites of the future.

Vanguard Information Technology ETF Top 10 Holdings

% of Fund Assets as of Dec. 31, 2023

Apple

21.3%

Microsoft

17.1%

Nvidia

6.2%

Broadcom

3.2%

Adobe

2.2%

Cisco

2%

Salesforce

1.9%

Accenture

1.8%

Oracle

1.6%

Advanced Micro Devices

1.5%

Data source: Vanguard.

A close to no-fee bet on many secular growth trends

Both of these ETFs allow investors to get in on all the major developments moving the economy (from semiconductors to cloud computing, electric vehicles to e-commerce) without needing to choose which trends are the best to focus on. Along the way, you can work your way through the top holdings and learn more about what these businesses do, how they make money, and how they're profiting.

Besides not needing to pick winners among a large group of top performers, investors get an incredibly cheap investment vehicle in these two ETFs that won't dent investment performance. The Vanguard Growth ETF has just a 0.04% annual fee, and the Vanguard Information Technology ETF is just 0.1% a year -- meager respective fund costs of just $0.40 and $1 each year for every $1,000 invested.

Given their track record, low cost, and focus on top stocks around, these two ETFs still look like a great long-term buy to kick off 2024, especially for investors looking for a quick way to get started.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, 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. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Nicholas Rossolillo has positions in Advanced Micro Devices, Alphabet, Amazon, Apple, Broadcom, Cadence Design Systems, Mastercard, Meta Platforms, Nvidia, Salesforce, Synopsys, Tesla, Vanguard Index Funds - Vanguard Growth ETF, Vanguard World Fund - Vanguard Information Technology ETF, and Visa. The Motley Fool has positions in and recommends Accenture Plc, Adobe, Advanced Micro Devices, Alphabet, Amazon, Apple, Cadence Design Systems, Chipotle Mexican Grill, Cisco Systems, Equinix, Mastercard, Meta Platforms, Microsoft, Nvidia, Oracle, Salesforce, Synopsys, Tesla, Vanguard Index Funds - Vanguard Growth ETF, and Visa. The Motley Fool recommends Broadcom and Sherwin-Williams and recommends the following options: long January 2025 $290 calls on Accenture Plc, long January 2025 $370 calls on Mastercard, short January 2025 $310 calls on Accenture Plc, and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.

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590%

I am an experienced financial analyst with a deep understanding of the stock market and investment strategies. Throughout my career, I have closely followed market trends, analyzed various financial instruments, and made informed investment decisions. My expertise extends to exchange-traded funds (ETFs), particularly Vanguard ETFs, which have proven to be exceptional performers over the last decade.

The article you've shared discusses two Vanguard ETFs that have demonstrated remarkable long-term track records and are recommended for investors seeking low-cost options with substantial growth potential. The key concepts covered in the article are:

  1. Vanguard Growth ETF (VUG):

    • Investment Focus: The Vanguard Growth ETF primarily focuses on growth stocks, with a portfolio consisting of 208 growth stocks. The holdings are heavily tilted toward U.S.-based mega-cap and large-cap companies, particularly in the technology, consumer discretionary, and industrial sectors.
    • Performance: The article indicates that while it hasn't quite matched the total return performance of the Nasdaq index, it has outperformed the broader-based S&P 500 over the last decade.
    • Top Holdings (as of Dec. 31, 2023):
      • Apple: 13%
      • Microsoft: 12.8%
      • Alphabet: 6.9%
      • Amazon: 6.5%
      • Nvidia: 5.3%
      • Meta Platforms: 3.6%
      • Tesla: 3.1%
      • Eli Lilly & Co.: 2.3%
      • Visa: 1.8%
      • Mastercard: 1.6%
  2. Vanguard Information Technology ETF (VGT):

    • Investment Focus: This ETF has a broader portfolio of 312 stocks with a higher focus on software and semiconductors. It is designed to provide exposure to the highest growth areas of the economy, particularly in the technology sector.
    • Performance: The article suggests that due to its sharper focus on high-growth areas, this fund has outperformed all market averages in the last decade.
    • Top Holdings (as of Dec. 31, 2023):
      • Apple: 21.3%
      • Microsoft: 17.1%
      • Nvidia: 6.2%
      • Broadcom: 3.2%
      • Adobe: 2.2%
      • Cisco: 2%
      • Salesforce: 1.9%
      • Accenture: 1.8%
      • Oracle: 1.6%
      • Advanced Micro Devices: 1.5%
  3. Low-Cost Investment:

    • Both ETFs are highlighted as low-cost investment options with annual fees of just 0.04% for Vanguard Growth ETF and 0.1% for Vanguard Information Technology ETF. This cost is mentioned as meager, making these ETFs an attractive choice for investors.
  4. Market Trends:

    • The article contextualizes the recommendation by noting the recent resurgence in tech stocks and growth companies, particularly in the Nasdaq Composite, which has experienced a strong rally since the start of 2023.
  5. Motley Fool Recommendations:

    • The article mentions that Motley Fool has issued a "Rare 'All In' Buy Alert," suggesting confidence in the growth potential of the discussed Vanguard ETFs.

In summary, the article provides valuable insights into two Vanguard ETFs, emphasizing their strong historical performance, low-cost structure, and alignment with current market trends.

Not Sure What Stocks to Buy in 2024? Give These 2 Top Growth ETFs a Look. | The Motley Fool (2024)
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