Growth stocks are back in the driver’s seat in 2024, and the Vanguard Russell 1000 Growth ETF (NYSEARCA:VONG) is a great, straightforward way to invest in a wide variety of them. I’m bullish on this growth-oriented ETF from Vanguard due to its strong portfolio of highly-rated growth stocks, impressive historical performance, sound diversification, and low expense ratio.
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What Is the VONG ETF’s Strategy?
According to fund sponsor Vanguard, VONG “invests in stocks in the Russell 1000 Growth Index, a broadly diversified index predominantly made up of growth stocks of large U.S. companies.” Vanguard says that VONG is “considered a gauge of large-cap growth U.S. stock returns.”
The Russell 1000 Index is an index of the 1,000 largest stocks in the Russell 3000 Index (which represents about 97% of the U.S. public equity market by market cap), and this ETF encapsulates the growth stocks within this large cohort. VONG was launched in 2010 and is now a fairly popular fund, with $18.8 billion in assets under management (AUM).
Winning Record
While there is nothing particularly complicated about this strategy of investing in growth stocks within the Russell 1000, VONG has used it for a long time to generate good returns for investors.
As of January 31, the fund has returned a respectable 10.0% on an annualized basis over the past three years. Zooming out, VONG has returned a stellar 18.0% on an annualized basis over the past five years and an impressive 15.4% on an annualized basis over the past 10 years. Since its inception in 2010, VONG has returned 15.9% per year.
Looking at it from a different perspective, the fund has returned 318.1% on a cumulative basis over the past decade, meaning that if you had put $10,000 into it 10 years ago, your investment would be worth over $41,800 today.
Furthermore, the growth-oriented fund has returned an even more impressive 618.7% on a cumulative basis since its inception in September 2010, meaning that if you put $10,000 into it back then, your investment would be worth nearly $72,000 today, illustrating the power of investing in good funds over the long term.
A Diversified Portfolio of Great Growth Stocks
VONG offers investors good diversification, as it holds 442 stocks. However, there is also some concentration here, as its top 10 holdings make up 51.6% of the fund’s assets.
Below is an overview of VONG’s top 10 holdings using TipRanks’ Holdings tool.
VONG’s list of top holdings includes most of the mega-cap tech names that investors know and love, including the entire “Magnificent Seven” — Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), Nvidia (NASDAQ:NVDA), Amazon (NASDAQ:AMZN), Meta Platforms (NASDAQ:META), Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), and Tesla (NASDAQ:TSLA) — plus Broadcom (NASDAQ:AVGO), which might as well be a member of this cohort at this point.
Given the way that these mega-cap tech stocks have come to dominate the broader market, and growth stocks in particular, the fund clearly has a technology bent. And while the technology sector has by far the largest weighting within the fund at 53.0%, growth isn’t limited to the tech sector, and VONG owns plenty of growth stocks from other industries.
For example, Eli Lilly (NYSE:LLY) is a top 10 holding that has demonstrated surging growth based on the breakthrough success of its GLP-1 drugs for diabetes and weight loss. The company recently reported fourth-quarter revenue that was up 28% year-over-year, remarkable growth for a company of its size, and guided to 2024 revenue that would represent 20% growth at the midpoint. Eli Lilly’s strong performance has even prompted some market observers to say it should replace Tesla in the Magnificent Seven.
Just outside of its top 10 holdings, VONG owns a wide variety of growth stocks from other sectors, including global payment networks Visa (NYSE:V) and Mastercard (NYSE:MA), as well as massive retail winners like Home Depot (NYSE:HD) and Costco (NASDAQ:COST).
VONG’s collection of growth stocks is viewed favorably by TipRanks’ Smart Score System. The Smart Score is a proprietary quantitative stock scoring system created by TipRanks. It gives stocks a score from 1 to 10 based on eight market key factors. A score of 8 or above is equivalent to an Outperform rating.
Seven of VONG’s top 10 holdings feature Outperform-equivalent Smart Scores of 8 or higher, including Broadcom and Amazon, which have ‘Perfect 10’ Smart Scores. Just outside of VONG’s top 10 holdings, Costco and Mastercard also enjoy 10 out of 10 Smart Scores. VONG itself features an Outperform-equivalent ETF Smart Score of 8.
What Is VONG’s Expense Ratio?
Perhaps best of all, VONG is a cost-effective way for investors to tap into this strong long-term performance and diversified collection of highly-rated growth stocks. VONG’s expense ratio of just 0.08% is extremely inexpensive. An investor will pay just $8 in fees on a $10,000 investment in VONG annually. This is a bargain for an ETF that has put up the types of returns that VONG has.
Assuming that the fund returns 5% per year going forward and maintains its current expense ratio, an investor initially putting $10,000 into VONG will pay just $103 in fees over the course of the decade. Investing in low-cost funds like this helps investors protect the principal of their investments over time and is an important but often overlooked consideration when building a portfolio.
Is VONG Stock a Buy, According to Analysts?
Turning to Wall Street, VONG earns a Moderate Buy consensus rating based on 357 Buys, 78 Holds, and eight Sell ratings assigned in the past three months. The average VONG stock price target of $93.84 implies 10.0% upside potential from current levels.
Investor Takeaway
There’s nothing particularly fancy or exotic about VONG’s strategy of investing in the Russell 1000 Growth Index, but it is a simple and effective way to invest in a large group of the market’s top growth stocks for a low fee. I’m bullish on this uncomplicated Vanguard ETF based on its track record of long-term performance, favorable expense ratio, and diversified portfolio of highly-rated growth stocks.
