Unlocking the Secret to Beating the Market
The S&P 500’s impressive 23% return in 2024 was eclipsed by the Vanguard S&P 500 Growth ETF’s staggering 38% gain. This remarkable outperformance can be attributed to the ETF’s unique strategy of tracking the S&P 500 Growth index, which focuses on the top-performing growth stocks.
The Power of High-Growth Trends
As we enter 2025, high-growth trends like artificial intelligence (AI) are poised to continue their upward trajectory. The Vanguard S&P 500 Growth ETF is well-positioned to capitalize on this momentum, given its significant weighting in the information technology sector (49.1% vs. 31.3% in the S&P 500).
Top Holdings Drive Outperformance
The ETF’s top five holdings, including Apple, Nvidia, Microsoft, Amazon, and Meta Platforms, have delivered impressive returns over the past 12 months. These stocks, with their significant market capitalizations, are driving the ETF’s outperformance.
Beyond Tech: A Diversified Portfolio
While the Vanguard ETF has a strong tech focus, it also holds powerhouse stocks from other industries, such as pharmaceutical giant Eli Lilly, retail behemoth Costco Wholesale, and fast-food titan McDonald’s. This diversification provides a balanced portfolio that can weather various market conditions.
A Proven Track Record
Since its inception in 2010, the Vanguard ETF has delivered a compound annual return of 16.4%, outpacing the S&P 500’s 14.1% average annual gain. This 2.3 percentage-point difference may seem small, but it has resulted in a significant dollar-value difference over time.
Riding the AI Wave
As AI continues to gain momentum, the Vanguard ETF is likely to benefit from its significant exposure to AI-related stocks like Nvidia. With Morgan Stanley predicting a combined $300 billion in AI chip and infrastructure spending by Microsoft, Amazon, Meta, and Alphabet, the ETF is poised for another strong year.
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