What's an 11-letter word that begins with "O" and aptly describes a stock market pullback like the one we're seeing right now? It's easy: The word is "opportunity."
Forward-thinking investors should view the current market volatility as a great opportunity. And you don't even have to be a fantastic stock-picker; you can instead invest in an exchange-traded fund (ETF). But which ETF should you select? I predict buying one Vanguard ETF today will set you up for life.
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Vanguard's top-performing ETF
The Vanguard Russell 1000 Growth ETF (VONG 2.52%) ranks as the top performer among the 90 ETFs that Vanguard markets. Since its inception in September 2010, this fund has delivered an average annual return of 16.59% (as of Feb. 28, 2025).
The ETF generated the second-highest gains over the last 10 years in the Vanguard family. It's also fourth over the last five years.
NASDAQ: VONG
Key Data Points
Granted, the Vanguard Russell 100 Growth ETF hasn't fared so well in recent weeks. It's down nearly 8% year to date and has dropped roughly 11% below its peak set in late 2024. However, I believe this pullback is only temporary and therefore gives investors an excellent chance to buy on the dip.
By the way, such opportunities typically haven't lasted very long in the past. This is the eighth time since its launch nearly 15 years ago that the Vanguard Russell 1000 Growth ETF has fallen by 10% or more from its previous high. In all but one of those instances, the ETF roared back quickly.
What makes this fund such a great pick
Of course, past performance isn't necessarily indicative of future returns. So why do I think buying the Vanguard Russell 1000 Growth ETF today could set you up for life? The answer lies in the underlying premise of the ETF.
The Vanguard Russell 1000 Growth ETF attempts to track the performance of the Russell 1000 Growth Index. This index consists of growth stocks in the Russell 1000, which includes the 1,000 largest stocks that trade on U.S. exchanges based on market cap.
This Vanguard ETF currently owns 395 stocks. Its top holdings include Apple, Microsoft, Nvidia, Amazon, and Meta Platforms. These five stocks alone make up around 44% of the fund's portfolio. Throw in both classes of Google parent Alphabet's shares and the total grows to over 50%.
I'm confident that all of the aforementioned stocks have tremendous growth prospects despite their recent declines. Every company on the list should enjoy a significant tailwind from artificial intelligence (AI) over the next decade and beyond.
What happens if large-cap stocks other than these current giants perform better? Because the Vanguard Russell 1000 Growth ETF is weighted by market cap, its portfolio will be regularly adjusted to invest more heavily in the shares of companies that are growing and invest less in those that are shrinking. That's a big plus of owning an index-based ETF.
Another advantage of Vanguard funds, in particular, is that fees won't eat into your gains very much. The annual expense ratio of the Vanguard Russell 1000 Growth ETF is a low 0.07%. The average expense ratio of similar funds is 0.94%.
A few caveats
Many predictions turn out to be wrong. Mine could, too. Although I think the Vanguard Russell 1000 Growth ETF should be a big winner over the long run, there's always a risk with investing in any stock or fund.
I'd be remiss if I didn't point out that how much you invest will make a big difference. Buying a handful of shares of the Vanguard Russell 1000 Growth ETF won't be enough to set you up for life. The amount you need to invest to achieve this goal will vary from person to person.
Also, I'm not predicting that buying this Vanguard ETF today and holding two or three years will set you up for life. I have the long term in mind with my prediction. You should think long-term, too.
It's possible, and perhaps even likely, that growth stocks will underperform over the near term. However, if your investing horizon extends out for 10, 15, or 20 years, or more, your chances of tremendous returns should increase dramatically.
