The term "Magnificent Seven" was coined by Wall Street in 2023 to describe a group of seven innovative technology companies that are leading the way in areas like artificial intelligence (AI), cloud computing, semiconductors, social media, electric vehicles (EVs), and more. They are worth a combined $20.6 trillion, and they have a habit of delivering blistering returns for investors.
In fact, the Magnificent Seven have produced a median return of 217% since the start of 2023, obliterating the 72% gain in the benchmark S&P 500 (^GSPC +0.81%) index over the same period.
In other words, investors who don't own these seven stocks are likely generating below-average returns. Fortunately, there's a simple way to fix that.
The Vanguard Mega Cap Growth ETF (MGK +0.68%) is an exchange-traded fund that invests exclusively in America's largest companies, and 59% of the value of its entire portfolio is parked in the Magnificent Seven. Here's why it could be a great addition to any diversified portfolio.
Image source: Getty Images.
A concentrated portfolio of tech giants
ETFs can hold hundreds of individual stocks, or even thousands, but the Vanguard Mega Cap Growth ETF holds just 66. It's designed to track the CRSP U.S. Mega Cap Growth Index, which covers 70% of the market capitalization of all 3,498 stocks in the CRSP U.S. Total Market Index. In other words, if we ranked all 3,498 of those stocks from largest to smallest, the Mega Cap Growth Index would start at the top and go down the list until it captured 70% of its total value.
That's right, just 66 stocks represent 70% of the value of all 3,498 companies listed on U.S. exchanges, which highlights the extreme concentration of wealth in the corporate sector. And as I touched on earlier, the Magnificent Seven represent 59% of the total value of those 66 stocks:
|
Stock |
Vanguard ETF Portfolio Weighting |
|---|---|
|
1. Nvidia (NVDA +1.73%) |
14.28% |
|
2. Apple (AAPL +0.74%) |
12.20% |
|
3. Microsoft (MSFT +2.03%) |
11.73% |
|
8.69% | |
|
5. Amazon (AMZN +0.66%) |
4.32% |
|
6. Tesla (TSLA 0.19%) |
4.22% |
|
7. Meta Platforms (META +0.09%) |
3.54% |
Data source: Vanguard. Portfolio weightings are accurate as of Oct. 31, 2025, and are subject to change.
All seven companies focus on new-age technologies like AI in their own unique ways. Nvidia, for example, supplies the best data center chips for AI development, and it has become the world's most valuable company on the back of sizzling-hot demand.
Microsoft, Alphabet, and Amazon are among the biggest buyers of those chips, which they use to develop their own AI models. They also rent some of their computing capacity to other businesses for a fee through their respective cloud platforms.
Apple has fitted its latest iPhones, iPads, and Mac computers with advanced chips capable of running its new Apple Intelligence software, which includes new AI-powered features to help users generate content, prioritize their notifications, and more.
Tesla, on the other hand, is no longer just an EV manufacturer. It's also a leading developer of autonomous vehicles, which could transform the company's economics. Then there is Meta, which uses AI to feed highly accurate content recommendations to users of its Facebook and Instagram social networks to keep them online for longer periods of time.
But despite the tech-heavy nature of the Vanguard Mega Cap Growth ETF, it does offer a splash of diversification. Eli Lilly, Visa, Mastercard, McDonald's, and Costco Wholesale are just a handful of its non-technology holdings.
NYSEMKT: MGK
Key Data Points
This Vanguard ETF can supercharge a diversified portfolio
The Vanguard Mega Cap Growth ETF has produced a compound annual return of 14% since its inception in 2007, and an even better return of 18.3% over the last 10 years, specifically. However, its highly concentrated nature means investors shouldn't put all of their eggs in one basket. Instead, this fund would be ideal for anyone with little or no exposure to the Magnificent Seven stocks already.
For example, let's say investors own the Vanguard Total World Stock ETF, which is extremely diversified with around 10,000 holdings from different countries all over the globe. Had they parked $20,000 in this ETF 10 years ago, they would be sitting on $58,868 today.
However, had they split the $20,000 by placing $10,000 in the Vanguard Total World Stock ETF and the other $10,000 in the Vanguard Mega Cap Growth ETF, they would have $83,118 today instead. This composition gives investors a healthy level of diversification, while still benefiting from high-growth trends like AI in a very big way.
