S&P Global is a financial company best known as the creator of the S&P 500 index, which is widely regarded as a benchmark for the entire U.S. stock market due to its diverse nature. Last year, economic uncertainty arising from red-hot inflation and rising interest rates caused the S&P 500 to fall into a bear market, and the index is still 15% off its high.
Not surprisingly, many growth stocks have fallen even more sharply, simply because growth stocks are usually valued based on future revenue and free cash flow, and those metrics tend to look quite grim during periods of economic hardship. As a result, the S&P 500 Growth index -- another product curated by S&P Global -- is currently 27% off its high.
However, investors should be aware of two things: First, the S&P 500 has suffered dozens of bear markets in the past, but the index has always recouped its losses during the next bull market. Second, while growth stocks have sharply over the past year, the S&P 500 Growth index has still outperformed the S&P 500 over the past one, two, and three decades.
With that in mind, here is one index fund to buy now and hold forever.
Buy all the growth stocks in the S&P 500
The Vanguard S&P 500 Growth ETF (VOOG 0.04%) tracks the S&P 500 Growth index, meaning it provides exposure to all of the growth stocks in the S&P 500. Specifically, the Vanguard ETF measures the performance of 230 stocks that span all 11 market sectors, though the technology and healthcare sectors account for more than half of its weight.
The top 10 holdings in the Vanguard S&P 500 Growth ETF are listed below.
- Apple: 11.6%
- Microsoft: 6.2%
- Alphabet: 6%
- UnitedHealth Group: 3%
- ExxonMobil: 2.7%
- Nvidia: 2.2%
- Amazon: 2.1%
- Visa: 2%
- Tesla: 2%
- Chevron: 1.9%
The Vanguard S&P 500 Growth ETF comes with one big advantage over individual stocks: It allows investors to instantly build a relatively diversified portfolio that requires very little oversight. As a caveat, the S&P 500 Growth index is less diverse than the broader S&P 500, simply because it excludes value stocks. That means the Vanguard S&P 500 Growth ETF is prone to greater volatility than an S&P 500 index fund, such as the Vanguard S&P 500 ETF (NYSEMKT: VOO).
However, volatility works both ways. The tech-heavy composition of the S&P 500 Growth index has been the driving force behind its long-term outperformance. While the broad-based S&P 500 is up 169% over the past decade, the S&P 500 Growth index is up 212%, meaning it produced an annualized return of 12% over the last 10 years.
Assuming the same rate of return, $100 invested weekly in the Vanguard S&P 500 Growth ETF would be worth about $91,200 in one decade, $374,600 in two decades, and $1.2 million in three decades. That said, expecting 12% annually over a 30-year time period is probably a bit optimistic, but the S&P 500 Growth index has undeniably outperformed the S&P 500 over the last 10-, 20-, and 30-year periods, so investors can reasonably assume growth stocks will continue to outperform in the long run. That makes the Vanguard S&P 500 Growth ETF a particularly attractive option for risk-tolerant investors.
