Given the potential for volatility in the stock market due to macroeconomic and geopolitical factors this year, a prudent approach to enhancing portfolio stability could involve considering investments in high-quality, large-cap growth ETFs. To that end, Vanguard Growth ETF (VUG) and Invesco QQQ Trust, Series 1 (QQQ) could be great choices.
Before diving deeper into the stats of these ETFs, let’s discuss what makes the investment case strong for large-cap growth ETFs.
Fed officials anticipate three interest rate cuts in 2024, marking the first reversal since rates started rising post-COVID-19. Lower interest rates are expected to benefit growth stocks, especially in the technology sector.
Nevertheless, the market may remain volatile due to prevailing macroeconomic conditions and geopolitical factors. To manage such volatility, investors may consider opting for large-cap stocks, as they have a proven track record of providing stable returns regardless of market fluctuations.
For those looking to mitigate the risks associated with individual large-cap stocks, large-cap ETFs, which offer diversified exposure to a collection of large-cap stocks, could present a more prudent option.
Given this backdrop, let’s evaluate the two Large Cap Growth ETFs picks, starting with number two.
ETF #2: Vanguard Growth ETF (VUG)
VUG is an exchange-traded fund launched and managed by The Vanguard Group, Inc. The fund invests in public equity markets in the United States. The fund invests in stocks of companies operating across diversified sectors. It invests in growth stocks of large-cap companies. It seeks to track the performance of the CRSP US Large Cap Growth Index by using a full replication technique.
With $104.83 billion in assets under management (AUM), VUG’s top holding is Apple Inc. (AAPL), with a 12.98% weighting, followed by Microsoft Corp. (MSFT), with a 12.95% weighting, and Amazon.com, Inc. (AMZN), with 6.24%. It has a total of 221 holdings.
VUG has an expense ratio of 0.04%, lower than the category average of 0.37%. VOX’s fund inflows were $2.35 billion over the past six months and $4.16 billion over the past year. It currently has a NAV of $302.52.
The ETF pays an annual dividend of $1.80, which yields 0.6% on the current price. It has a four-year average dividend yield of 0.66%.
VUG has gained 21.4% over the past nine months and 43% over the past year to close the last trading session at $302.49.
VUG’s POWR Ratings reflect this promising outlook. The ETF’s overall A rating equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
VUG has an A grade for Buy & Hold and Trade. Of the 61 ETFs in the A-rated Large Cap Growth ETFs group, it is ranked #2. Click here to access all of VUG’s POWR Ratings.
ETF #1: Invesco QQQ Trust, Series 1 (QQQ)
QQQ is managed by Invesco Capital Management LLC. The fund invests in public equity markets of the global region. It invests in growth and value stocks of large-cap companies. It seeks to track the performance of the NASDAQ-100 Index by using a full replication technique.
With $224.77 billion in AUM, the fund has a total of 64 holdings. QQQ’s top holding is AAPL, with a 9.04% weighting, followed by MSFT, with an 8.63% weighting, and AMZN, with 4.85%. It has a total of 101 holdings.
QQQ has an expense ratio of 0.20%, lower than the category average of 0.37%. It currently has a NAV of $398.29. Its fund inflows came in at $7.83 billion over the past six months.
The fund’s annual dividend of $2.32 yields 0.58% on the current share price. Its four-year average yield is 0.60%. Its dividend payouts have increased at a CAGR of 10.1% over the past three years and 10.6% over the past five years.
QQQ has gained 24.5% over the past nine months and 50.7% over the past year to close the last trading session at $398.33.
QQQ’s strong outlook is reflected in its POWR Ratings. The ETF has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
It has an A grade for Buy & Hold and Trade and a B for Peer. It is ranked first in the same ETF group. To access all the POWR Ratings for QQQ, click here.
What To Do Next?
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QQQ shares fell $1.70 (-0.43%) in premarket trading Thursday. Year-to-date, QQQ has declined -2.92%, versus a -1.26% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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