ETF Spotlight: Growth Is Back, and VUG Takes Off
The $148 billion Vanguard ETF with a Mag 7 focus is drawing in billions amid the wider market slump.
With broad stock indexes inching higher after hitting their lowest point since early September, investors are looking again at the equities that drove markets higher in 2023 and 2024, including the Vanguard Growth ETF (VUG).
The $148 billion ETF, with top holdings mirroring the Magnificent 7 stocks, which pushed markets to record levels in the previous two years, pulled in $3.6 billion during the past five sessions through March 18, including $2.4 billion on that Tuesday.
The seventh-largest U.S. ETF has moved up 2.6% since March 13, when it closed at its lowest price since early September. While the Vanguard S&P 500 ETF (VOO) has gained as much over the same period, VUG had fallen further this year, dipping 7.7% since the year began versus VOO’s 3.2% decline.
Market Correction
Investors have shied away from equities, and growth stocks in particular, out of concern that prices are high and the market may be due for a correction after the S&P 500 gained more than 50% over the course of 2023 and 2024. The S&P 500 hit correction territory March 6, when it fell more than 10% from its peak in December. Funds like the Invesco QQQ Trust (QQQ) shed millions that day.
“Plenty of investors believe growth stocks are oversold and that the bull market is not over; thus, they are buying on the correction,” said etf.com Senior Content Editor Kent Thune, CFP. “In sexier terms, ‘buy the correction’ is the new ‘buy the dip.’”
VUG focuses on large-cap growth stocks, and its top-10 holdings include all of the Mag 7 stocks: Apple Inc. (AAPL), Microsoft Corp. (MSFT), Nvidia Corp. (NVDA), Amazon.com Inc. (AMZN), Meta Platforms Inc. (META), Tesla Inc. (TSLA) and Google parent company Alphabet Inc. (GOOGL).
Stocks are chosen based on factors including expected short- and long-term earnings growth, three-year historical earnings per share (EPS), investment-to-assets ratio and others.
