Growth stocks have soared this year as investors bet on an improving economic environment and technology players involved in the high-potential area of artificial intelligence (AI). This has helped the overall market advance, bringing the S&P 500 to a 23% increase over the past 10 and a half months. The benchmark also confirmed its presence in a bull market early in the year, another element adding to investor optimism -- and appetite for growth stocks.
Companies investing in growth generally thrive in bull environments, making them fantastic players to own during strong market times. And since we favor long-term investing, you may hold them through more than one bull market -- and potentially score a major win over time.
Now, as we look for ways to benefit from today's bull market, it's a good idea to pick up several quality growth players, and the great news is you can easily do this with one simple investing move. And that's by investing in an exchange-traded fund (ETF), an instrument that holds many stocks according to a particular theme -- in this case, growth. Let's check out the smartest megacap growth ETF to buy with $500 (or even a bit less) right now.
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Investing in many stocks with one simple move
First, let's quickly talk about ETFs. As mentioned, they invest in many stocks, offering you access to several of the day's leading players in various areas. ETFs may mimic a major index, like the S&P 500, or an industry such as consumer goods, or companies that offer growth or dividend payments, just to mention a few examples. ETFs trade daily like stocks, so you can easily buy or sell them as you would a stock. And by investing in an ETF, you're sure to get access to the best of an industry or investment theme -- without having to study up on that particular topic and become an expert on it.
The one main difference between investing in a stock and investing in an ETF is ETFs come with management fees, expressed as an expense ratio. You'll want to go for ETFs with an expense ratio of less than 1% to keep your costs down over time and maximize your potential gains.
Now, let's consider the top growth ETF to buy today, and that's the Vanguard Mega Cap Growth ETF (MGK -1.53%). With an expense ratio of 0.07% and trading for about $330, it's within our budget, and this fund offers you access to top growth stocks that have led the market's gains this year and have what it takes to climb over the long term.
The Mega Cap ETF's most heavily weighted industry -- at 61% -- right now is, unsurprisingly, the technology industry. The ETF tracks the performance of the CRSP U.S. Mega Cap Growth Index so follows this index's current selections -- if one day another industry surpasses technology, the index and the ETF would favor that particular industry. This is great because it ensures you'll always be invested in the market's top growth players.
The ETF's biggest holdings right now
And the same goes for individual stocks -- the composition of the index and ETF change according to which players dominate the growth scene of the times. Today, the Mega Cap ETF's biggest holdings are Apple, Nvidia, and Microsoft, each weighing in at more than 12%.
But, before you consider this fund as just a tech one, listen to this: The Mega Cap ETF actually is a fantastic way to diversify across many types of growth names because it includes stocks in a total of 10 industries. Other heavily weighted stocks in the fund include pharma giant Eli Lilly and electric vehicle powerhouse Tesla.
This strategy has shown its strength this year and over the long term. The Mega Cap ETF is heading for a 27% increase in 2024, surpassing the S&P 500's gains. And over 10 years, the ETF's performance is even more impressive, with a 300% increase compared to the S&P 500's advance of about 187%.
All of this shows that investing in the Mega Cap ETF is a very easy way to gain immediate access to a diversified basket of top growth stocks -- ones that could offer you gains during this bull market and over the long haul.
