The economic landscape is changing as we head into 2026, but one thing that remains unchanged is the leadership of growth stocks. After a shaky start to 2025, growth stocks were able to reassert themselves, powered by healthy earnings and a resilient U.S. economy.
Over the long term, growth equities deserve a meaningful spot in your portfolio. After all, this is where a lot of the innovation, investment, and progress is happening. But to invest in this theme properly, you should look for companies that are delivering results, not just hope.
That's why the Vanguard Growth ETF (VUG 0.38%) deserves a long-term spot in your portfolio.
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What does the Vanguard Growth ETF do?
VUG tracks the CRSP US Large Cap Growth Index. This index begins with a universe encompassing approximately 85% of the total market capitalization of the U.S. equity market. It then pulls out the ones with the best combination of growth characteristics, including earnings growth, sales growth, and return on assets (ROA).
It still has significant exposure to the Magnificent Seven stocks, but its larger starting universe also allows for the inclusion of smaller, fast-growing companies. Its expense ratio of just 0.04% is among the lowest you'll find in this category.
Not surprisingly, tech accounts for a heavy 63% of the portfolio, and the Magnificent Seven account for nearly 54%.
NYSEMKT: VUG
Key Data Points
Why the Vanguard Growth ETF is right for this economy
Skeptics may point to concentration risk as an issue with VUG. In the current environment, I don't see it as quite that problematic.
Mega-cap companies are outperforming and driving the biggest share of revenue and earnings growth due to the artificial intelligence (AI) revolution. They've been the clear winners thus far due to size, scale, efficiency, and resources.
The AI boom is likely to remain a dominant theme for many years, so why not overweight the companies that are leaders in this space? As AI development deepens and broadens, we can expect to see many more winners emerge.
VUG provides the best of both worlds. You get the current leaders of the present and the future winners emerging from the smaller company universe. The fund currently holds approximately 160 stocks, so there's plenty of opportunity for inclusion beyond just the biggest names.
In my opinion, the Vanguard Growth ETF is one of the best ETFs in this category, as it offers the optimal combination of coverage and cost.
Many growth ETFs focus solely on large-cap stocks. VUG's strategy of including mid-caps provides a better opportunity for capturing current under-the-radar growth companies. Its ultra-low expense ratio ensures that shareholders keep as much of the fund's returns as possible. Its qualifying criteria require demonstrable growth, focusing on results rather than potential.
It's one of the best ways for investors to capture long-term economic growth trends.
