This index fund is outperforming the S&P 500 this year.
The stock market has soared this year, with the S&P 500 confirming its presence in a bull market back in January and then going on to reach multiple record highs. The good news is history shows us that bull markets generally last much longer than bear phases, so this positive momentum could continue for quite some time.
What types of stocks should you buy in this environment? Growth stocks generally lead the way in times of market optimism, and so far, that is what’s happened this time around, too. You could select several growth players to add to your portfolio right now. But there’s another way — a very simple way, actually — to gain exposure to these high-potential stocks. You can invest in an index fund that focuses on growth.
A great example is the Vanguard S&P 500 Growth ETF (VOOG 0.36%), an exchange-traded fund (ETF) that tracks the S&P 500 Growth Index, which comprises the S&P 500’s growth stocks. And you can get in on it with less than $500. Let’s take a closer look at this asset that makes a no-brainer addition to your portfolio.
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As easy as investing in stocks
So, first, a bit of background on ETFs. Don’t let these assets intimidate you. They’re as easy to invest in as stocks as they trade throughout the daily trading sessions just like stocks. The one element to consider before picking up an ETF, though, is its expense ratio, a measure of fees involved in owning the fund. You’ll want one with an expense ratio of less than 1% to ensure fees don’t eat into your returns over time.
The advantage of getting in on an ETF is that it allows you, with just one purchase, to gain exposure to a huge basket of stocks related to a particular theme. This could be an investment style, an industry, or an index. This doesn’t mean you should stop stockpicking and investing in individual stocks. Instead, add a few ETFs to your portfolio to complement your current investment strategy.
An ETF focused on growth is a great idea today, considering the strength of the market, but it also makes a solid long-term investment. As a long-term investor, you’ll invest through plenty of market cycles, and you’ll increase your chances of winning by holding quality assets over a period of years rather than jumping in and out of them.
Today’s biggest growth stocks
Now, let’s consider the Vanguard S&P 500 Growth ETF. Today’s biggest growth stocks, unsurprisingly, are in information technology, so this industry is weighted nearly 50% in the ETF. The biggest holdings — Apple, Microsoft, and Nvidia — weigh in at more than 12%, 11%, and 10%, respectively. Technology stocks generally have been top growth players, but the movement has accelerated recently with the artificial intelligence (AI) boom. And those investing in this area have seen their portfolios soar.
Though technology is heavily weighted, the fund also offers you plenty of diversification, and that’s another positive point about investing in an ETF. This means if one industry or player stumbles, others may compensate. The Vanguard fund includes 10 other industries, and the other two most heavily weighted — in the double digits — are communication services and consumer discretionary.
It’s important to remember that these weightings could change depending on the economy. So, investing in this ETF ensures you’ll always be investing in the top growth stocks of the time.
Today, the Vanguard fund is trading for about $358, so you can buy a share for less than $500 or, if you have a bigger budget, take on a larger holding. The fund has climbed 32% this year, surpassing the S&P 500’s 24% increase, and as long as this bull market continues, it may have plenty of room to run. As mentioned, beyond this particular bull market, this growth investment could help your portfolio thrive over the long run.
Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
