U.S. growth stocks like the "Magnificent Seven" and the artificial intelligence (AI) trade have been big moneymakers for investors in recent years. But some investors worry that large-cap growth stocks are overvalued and at risk of a downturn. What if there were another way to invest in growth stocks?
The Vanguard S&P Mid-Cap 400 Growth ETF (IVOG -0.59%) could be worth considering for growth-focused investors. This exchange-traded fund (ETF) offers a portfolio of 245 stocks of mid-cap companies with a median market cap of $14.2 billion. In the past nearly 16 years since this fund's inception in September 2010, it has delivered average annual returns of 12.31%.
Those returns are good enough to make you a millionaire, but there are a few important details to keep in mind. Let's look at this Vanguard ETF and see if it's a good choice for your portfolio.
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What is the Vanguard S&P Mid-Cap 400 Growth ETF?
If you're worried that major tech names are too richly valued and unlikely to deliver such strong returns in the future, buying mid-cap growth stocks could offer a different path forward. The Vanguard S&P Mid-Cap 400 Growth ETF holds a portfolio of lesser-known, fast-growing, smaller companies.
NYSEMKT: IVOG
Key Data Points
Instead of the Magnificent Seven or major tech stocks, this growth ETF's top holdings include:
- Twilio (a communications technology stock): 1.64% of the fund
- Curtiss-Wright (a defense stock): 1.46%
- nVent Electric (an industrial stock involved with liquid cooling solutions for AI workloads): 1.44%
- ATI (a specialty materials company involved in aerospace and defense): 1.41%
- TechnipFMC (an energy stock; this company makes equipment for the oil and gas industry): 1.38%
This is a different mix of stocks than you would get from a typical S&P 500 index fund. And even if you haven't heard of most of these names, these mid-cap growth companies might grow to become household names in the future.
Is IVOG a millionaire-maker ETF?
This growth stock ETF has a strong track record, with 12.31% average annual returns for the past 15 years. With the power of compounding growth, that level of return could make you a millionaire.
Let's say you invest $500 per month in the Vanguard S&P Mid-Cap Growth ETF, and your investment grows at that same average rate of 12.31% per year. After 15 years, you'd have $229,339. After 20 years, you'd have $448,151. After 25 years, you'd have $839,138. And after 27 years, you'd have over $1 million.
There's no guarantee that this growth ETF will keep delivering this same high level of returns into the future. Large-cap stocks or value stocks might outperform it. But if you want to invest in a different part of the market that still offers high growth potential, the Vanguard S&P Mid-Cap 400 Growth ETF could be worth a look.
