Vanguard is renowned for its low fees, and its exchange-traded funds (ETFs) are no exception.
A standout option is the Vanguard Mega-Cap Growth ETF (MGK 0.41%), which provides concentrated exposure to America's largest and fastest-growing companies, all in a single ticker.
In this article, we'll cover what MGK is, its holdings, how to buy it, its historical performance, and everything else you need to know before making a buying decision.
What is MGK?
What is MGK?
MGK is a passively managed ETF that tracks the performance of the CRSP US Mega Cap Growth index.
This index represents the largest 70% of the broader CRSP US Total Market Index based on market capitalization, with a median market cap of $2 trillion.
MGK is heavily weighted toward more innovative sectors, particularly technology, communications, and consumer discretionary.
Due to its growth focus, the ETF includes companies with strong fundamentals, featuring high average earnings growth rates and impressive return on equity ratios.
Exchange-Traded Fund (ETF)
How to buy MGK
How to buy MGK
Buying shares of MGK is straightforward, just like buying any other ETF. Here's a quick rundown of the steps:
- Open a brokerage account. If you don't already have one, you'll need a brokerage account that allows ETF trading. Most brokers do, but it's worth double-checking.
- Determine how much to invest. Based on your risk tolerance and goals, decide how much you’re comfortable putting into MGK.
- Search for the ticker. Type "MGK" into your broker's search bar to pull up the ETF. Make sure you're selecting shares and not options or any other product.
- Place your order. Enter the number of shares you want to buy, set your price (if placing a limit order), and submit.
Once your order is filled, you'll own shares of MGK.
Holdings of MGK
Holdings of MGK
MGK's holdings are based on the CRSP US Mega Cap Growth index, which the fund tracks. When the index is rebalanced or reconstituted, MGK's holdings are adjusted accordingly.
As of Sept. 13, 2024, the ETF held 71 stocks, with the following top 10 holdings (with weights):
Should I invest in MGK?
Should I invest in MGK?
If you meet most of the following criteria, MGK might be a suitable investment for you:
- You are primarily bullish on mega-cap stocks with a median market capitalization in the trillions.
- You want to focus on growth stocks with high earnings, high growth rates, and strong return on equity.
- You're comfortable with significant exposure to the technology sector.
- You're OK with a relatively narrow portfolio that is top-heavy.
- You have a high risk tolerance and can handle the volatility of growth stocks.
- You're investing with a buy-and-hold mindset and a long time horizon.
Dividends
Does MGK pay a dividend?
Yes, MGK does pay a dividend, although it's modest. The ETF distributes dividends every quarter, usually with an ex-dividend date in the second-to-last week of the month and payable at the beginning of the following month.
However, since MGK focuses on growth stocks, the dividend yield is low. Most of the companies in this ETF reinvest their earnings and conduct share buybacks rather than paying substantial dividends.
As of Aug. 31, 2024, MGK's 30-day SEC yield was just 0.42%, and it has historically hovered around that level. The bulk of MGK's returns come from capital appreciation rather than income.
Expense ratio
What is MGK's expense ratio?
Like most Vanguard passively managed ETFs, MGK has a low expense ratio of just 0.07%.
An expense ratio represents the annual fee charged by the fund to cover management and operational costs.
Although you don't pay this fee directly, it's deducted from the fund's returns over time, which slightly reduces your overall investment performance.
For a $10,000 investment, this translates to just $7 per year in fees, making MGK a very cost-effective option for long-term investors.
Expense Ratio
Historical performance
Historical performance of MGK
Here's a look at how MGK has performed in terms of total returns (i.e., with dividends reinvested) over various time periods:
| ETF | 1-Year | 3-Year | 5-Year | 10-Year |
|---|---|---|---|---|
| MGK (Market) | 31.03% | 8.78% | 19.71% | 15.90% |
| MGK (NAV) | 31.16% | 8.79% | 19.71% | 15.91% |
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The bottom line on MGK
MGK is an extremely affordable way for investors to access the largest U.S. growth stocks through a single ticker. With an expense ratio of just 0.07%, it falls into the cheapest quintile of large-cap growth ETFs.
Additionally, its low yield and portfolio turnover make it particularly tax-efficient, offering a cost-effective option for long-term ETF investors looking for capital appreciation. Overall, it's one of the best ETFs one can buy.
FAQ
Investing in MGK FAQ
Is Vanguard MGK a good investment?
If you're seeking exposure to the largest growth stocks, MGK is a good investment due to its low fees and simplicity.
How do I buy the Vanguard growth ETF?
You can buy MGK like any other ETF through a brokerage by searching for its ticker and placing an order.
Is MGK an ETF or mutual fund?
MGK is an ETF, not a mutual fund. The difference is MGK is traded on an exchange.
