Experiencing the Sole Vanguard ETF that Transformed an Initial $10,000 into a Subsequent $93,000 since 2010
Experiencing the Sole Vanguard ETF that Transformed an Initial $10,000 into a Subsequent $93,000 since 2010
Vanguard offers 86 exchange-traded funds (ETFs), and over a thousand of these have provided year-to-date returns of at least 20%, thanks to the upward trend in stocks and bonds. However, the real test lies in the funds' performance over the long term.
If you're seeking top-performing ETFs, one standout from Vanguard's lineup is a clear frontrunner. This distinguished ETF has transformed an initial $10,000 investment into over $93,000 since 2010.
Outshining the S&P 500
When discussing the stock market, the S&P 500 often comes to mind. It's understandable, given that it features the 500 largest US corporations, many of which are familiar names. The S&P 500's performance typically reflects the overall market trend.
However, the top-performing Vanguard ETF isn't an S&P 500 fund. Instead, it's the Vanguard Russell 1000 Growth ETF (VONG), which aims to mirror the Russell 1000 Growth Index. This index encompasses growth stocks belonging to the Russell 1000, comprising approximately 1,000 of the largest US corporations, representing around 93% of the entire US equity market.
The Vanguard Russell 1000 Growth ETF holds 394 stocks, with a median market cap of $1.4 trillion. Its top seven holdings, consisting of Apple, Microsoft, Nvidia, Amazon, Meta Platforms, Alphabet Class A, and Alphabet Class C, account for around 51.5% of its portfolio.
Over the previous five years, this ETF ranked as the third-best-performing Vanguard ETF, and for the past decade, it held the second position. Since its launch in September 2010, the ETF has maintained the top spot in the Vanguard ETF hierarchy.
The secret behind its success
The adventure of placing an initial $10,000 investment in the Vanguard Russell 1000 Growth ETF in 2010 and watching it grow to around $93,260 can be attributed to several factors.
Firstly, a significant number of the ETF's stocks have provided substantial gains since 2010. Its leading six holdings, including Nvidia's shares that have skyrocketed by more than 48,700%, have been major contributors to its success.
Secondly, periodic rebalancing has played a crucial role. Underperforming stocks were expelled from the Russell 1000 Growth Index, which subsequently left the ETF's portfolio. Conversely, booming stocks acquired more weightage.
Thirdly, dividends have played a significant part, too. Without dividends being reinvested, the initial $10,000 investment would have grown to around $79,200. Still, a commendable return, but far less lucrative than the $93,260 an investor could have gained with dividends in the mix.
Lastly, the ETF's low costs can't be overlooked. Vanguard is renowned for its minimal expense ratios, and the Vanguard Russell 1000 Growth ETF is no exception, boasting a modest annual expense ratio of 0.08%. In comparison, the average expense ratio for similar funds is a staggering 11 times higher, hovering around 0.94%.
Should you invest in the Vanguard Russell 1000 Growth ETF now?
While there are no guarantees that the Vanguard Russell 1000 Growth ETF will continue delivering such exceptional returns, there are compelling reasons to consider it a promising option for long-term investors.
Concerns about valuation and potential volatility may arise, as the average stock in the ETF's portfolio currently trades at a price-to-earnings ratio of 36.2. Additionally, the ETF's price has plummeted by over 20% on three separate occasions over the past six years.
Nevertheless, the factors that have contributed to the ETF's remarkable performance since 2010 are likely to maintain its outperformance over the coming decade and beyond.
Investing wisely in the finance sector can lead to substantial returns, as shown by the Vanguard Russell 1000 Growth ETF (VONG). This ETF, with an initial investment of $10,000 in 2010, has grown to over $93,000, outperforming the S&P 500.
The high success rate of the Vanguard Russell 1000 Growth ETF can be attributed to its focus on growth stocks, periodic rebalancing, and dividend reinvestment, along with its low expense ratio of 0.08%. These factors, coupled with the strong performance of leading stocks in the ETF, have contributed to its impressive growth.