Exchange-traded funds, or ETFs, have become one of the most popular ways to invest these days. Inflows into ETFs are soaring as more investors look for ways to capitalize on the artificial intelligence (AI) boom. In fact, ETF inflows have already topped $1 trillion this year and are expected to reach $1.4 trillion.
It’s part of a trend where investors are moving money out of mutual funds and into cheaper, more liquid ETFs.
ETFs offer several advantages over individual stocks. They can give investors easy access to a group of stocks, such as those that track an index fund, sector, country, or other topic that investors want to learn about. ETFs do the hard work of picking individual stocks for you and are just as easy to buy and sell as individual stocks.
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Vanguard is one of the oldest and most trusted ETF managers and has invented an index fund or type of ETF that tracks indices such as S&P 500(SNPINDEX: ^GSPC). While the S&P 500 index fund may be the ETF gold standard, some Vanguard ETFs have outperformed the S&P 500, particularly during the recent AI boom.
In fact, there’s one Vanguard ETF that’s expected to outperform next year, with one Wall Street analyst predicting it will even jump 39%.
The Vanguard Growth ETF(NYSEMKT: VUG) have historically been the best on the market. As you can see from the chart below, the Vanguard Growth ETF has significantly outperformed the S&P 500 over the past decade.
Data from YCharts.
As you can see, VUG has generally outperformed the S&P 500 in bull markets, but underperformed in bear markets such as 2022.
It’s been a successful combination over the past decade as the stock has soared. Wall Street expects that to continue next year, as the median price target calls for a 15 percent gain in the index, up from just 13 percent. Vanguard S&P 500 ETF.
An ETF is only as good as its holdings, so it’s important to understand what the Vanguard Growth ETF is. Its top holdings are similar to the S&P 500, but with higher concentrations. An ETF that tracks CRSP US Large Cap The index has 160 stocks with a focus on large-cap growth companies. Currently, 62% of the index is in the technology sector, and its eight largest holdings can be attributed to technology stocks. This is the allocation order, Nvidia, Microsoft, Apple, Alphabet, Amazon, Broadcom, Meta platformsand Tesla.
These eight stocks, which along with Broadcom represent the “Big Seven,” account for nearly 60% of the index.
The Vanguard Growth ETF looks poised to win, especially if the stock market continues to move higher, but a 39% gain might be overkill even for a fund with high-end tech stocks.
in 2023 The ETF jumped 46% and 2024 – another 32%, and so far it is 16%. 46% increase in 2023 suggests a 39% year-over-year jump is possible, but that was in the early stages of the AI boom, with tech stocks taking a beating after 2022. bear markets.
Today, VUG is significantly more expensive, trading at a price-to-earnings ratio of 41.
That, combined with questions about the AI bubble and a weakening job market, means the fund is unlikely to grow 39% over the next year. However, given its experience and largest shareholding, VUG still looks like the best investor.
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1 “Vanguard ETF”, which until 2026 could rise 39 percent by the end of the year, according to a top Wall Street analyst, originally reported by The Motley Fool
