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Vanguard Growth ETF: My Top Pick for 2025 and Beyond

AInvestSunday, Jan 5, 2025 12:11 pm ET
4min read


As we approach 2025, I find myself increasingly drawn to the Vanguard Growth ETF (VUG), a fund that has consistently outperformed the broader market and offers exposure to some of the most innovative and promising companies in the tech sector. In this article, I'll share my reasons for choosing VUG as my top pick for 2025 and beyond, and explain why I believe it's an excellent long-term hold.



Tech sector leadership

One of the primary reasons I'm bullish on VUG is the fund's heavy concentration in the tech sector, which I expect to continue leading the market in 2025. The top seven holdings of VUG, which account for about 52.5% of the portfolio, are all strong plays on the artificial intelligence (AI) megatrend. These companies are leaders in various aspects of AI, from AI chips to cloud computing to software to robotics to autonomous driving. As long as spending on AI remains strong and companies look to advance their AI models, I believe these stocks by and large will continue to outperform the market.

Strong track record

VUG has a stellar track record, with an average annualized return of 15.6% over the past 10 years, as of the end of November 2024. This easily surpasses the 13.4% average annual return of the S&P 500 over the same period. In 2024, VUG was up a better-than-usual 32.1% as of the end of November. This consistent outperformance demonstrates the fund's potential to generate substantial returns over the long term.



AI megatrend

The AI megatrend is still in its early innings, and I believe that spending on AI will remain strong. Companies will continue to advance their AI models, driving demand for the products and services offered by VUG's top holdings. This should help VUG maintain its momentum in 2025 and beyond.

Potential for outperformance

I prefer VUG over the Vanguard Information Technology ETF (VGT) because VUG has a more diversified top holding, including Amazon, Alphabet, Meta Platforms, and Tesla. These four stocks could be strong performers in 2025, further enhancing VUG's potential for outperformance. Additionally, VUG's top seven holdings are more diversified across various aspects of AI, which should help the fund weather any potential setbacks in individual companies.



Bull market momentum

I expect the bull market to continue in 2025, with large-cap growth names once again leading the way. The Federal Reserve is expected to continue pushing interest rates lower, and a potentially looser regulatory environment should also help drive the market forward. This should benefit VUG's holdings, which are well-positioned to capitalize on the ongoing tech sector leadership.

Conclusion

In summary, the Vanguard Growth ETF (VUG) is my top pick for 2025 and beyond due to its strong track record, exposure to the AI megatrend, and potential for outperformance. The fund's heavy concentration in the tech sector, particularly in AI-related companies, positions it well to capitalize on the continued growth of this industry. With a stellar track record and a diversified portfolio of top holdings, VUG is an attractive long-term hold for investors seeking exposure to the tech sector's growth potential.

As always, it's essential to do your own research and consider your risk tolerance and investment goals before making any investment decisions. However, I believe that VUG's combination of strong performance, diversification, and exposure to the AI megatrend makes it an excellent choice for long-term investors seeking to capitalize on the tech sector's growth potential.
Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.