Make Money in Growth Stocks the Easy Way

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect growth stocks to keep growing briskly in the coming years, the Vanguard Growth (NYSE: VUG) ETF could save you a lot of trouble. Instead of trying to figure out which growers will perform best, you can use this ETF to invest in several dozen of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The Growth ETF's expense ratio -- its annual fee -- is a very low 0.14%. And while the typical growth stock prefers to plow excess cash into further growth instead of paying out dividends, this ETF offers a dividend, albeit a modest one, yielding 1.1%.

The Vanguard Growth ETF doesn't have the longest track record, but over the past five years, it has outpaced the S&P 500. As with most investments, we can't expect outstanding performance in every quarter or year. Investors with conviction need to wait for their holdings to deliver. With a relatively low turnover rate of 26%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.

What's in it?
The ETF contains roughly 430 growers from among the MSCI U.S. Prime Market 750 Index of large-cap companies. Several of its components made strong contributions to its performance over the past year. Freeport McMoRan Copper & Gold (NYSE: FCX) is up 27% over the past year, largely thanks to rising prices of the metals included in its name. Storage giant EMC (NYSE: EMC) gained 38%, and its CFO recently projected revenue growth exceeding 13% over the coming four years, with earnings growth even higher. My colleague Eric Bleeker considered EMC one of the top tech stocks for 2011. Philip Morris International (NYSE: PM), meanwhile, gained 34% and remains attractive, thanks to its fat moat, hefty cash flow, and market dominance.

Other companies didn't add much to the ETF's returns last year, but could have an effect in the years to come. Cisco Systems (Nasdaq: CSCO), for example, lost 38% over the past year, and right now many are worried that it needs more focus. Its CEO agrees and aims to turn things around. Ford (NYSE: F), meanwhile, rose just 7% over the past year, slightly underperforming the market. Bulls expect it to grow more as the global economy improves and pent-up demand for new vehicles is sated.

The big picture
Growing companies are what fuel stock market returns. A well-chosen ETF can grant you instant diversification across a range of large growers -- and make investing in and profiting from the sector that much easier.

Keep your eye on these investments by adding them to your watchlist:

• Add Vanguard Growth ETF to My Watchlist.
• Add Freeport McMorRan Copper & Gold to My Watchlist.
• Add EMC to My Watchlist.
• Add Cisco Systems to My Watchlist.
• Add Ford to My Watchlist.
• Add Philip Morris International to My Watchlist.

ETFs can help you find the way to better investing results. To find some great ETF investing ideas, take a look at The Motley Fool's special free report, " 3 ETFs Set to Soar During the Recovery ."