Launched on 12/17/2007, the Vanguard Mega Cap Growth ETF (MGK) is a passively managed exchange traded fund designed to provide a broad exposure to the Large Cap Growth segment of the US equity market.
The fund is sponsored by Vanguard. It has amassed assets over $14.18 billion, making it one of the larger ETFs attempting to match the Large Cap Growth segment of the US equity market.
Why Large Cap Growth
Large cap companies typically have a market capitalization above $10 billion. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.
While growth stocks do boast higher than average sales and earnings growth rates, and they are expected to grow faster than the wider market, investors should note these kinds of stocks have higher valuations. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. They are likely to outperform value stocks in strong bull markets but over the longer-term, value stocks have delivered better returns than growth stocks in almost all markets.
Costs
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.
Annual operating expenses for this ETF are 0.07%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 0.41%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Information Technology sector--about 47.20% of the portfolio. Consumer Discretionary and Telecom round out the top three.
Looking at individual holdings, Apple Inc. (NASDAQ:AAPL) accounts for about 12.44% of total assets, followed by Microsoft Corp. (MSFT) and Amazon.com Inc. (NASDAQ:AMZN).
The top 10 holdings account for about 55.58% of total assets under management.
Performance and Risk
MGK seeks to match the performance of the CRSP U.S. Mega Cap Growth Index before fees and expenses. The CRSP US Mega Cap Growth Index is a float-adjusted, market-capitalization-weighted index designed to measure equity market performance of mega-capitalization growth stocks in the United States.
The ETF return is roughly 0% so far this year and was up about 29.84% in the last one year (as of 01/04/2022). In the past 52-week period, it has traded between $195.08 and $264.33.
The ETF has a beta of 1.02 and standard deviation of 24.64% for the trailing three-year period, making it a medium risk choice in the space. With about 108 holdings, it effectively diversifies company-specific risk.
Alternatives
Vanguard Mega Cap Growth ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, MGK is an outstanding option for investors seeking exposure to the Style Box - Large Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.
The Vanguard Growth ETF (VUG) and the Invesco QQQ (QQQ) track a similar index. While Vanguard Growth ETF has $90.73 billion in assets, Invesco QQQ has $217.55 billion. VUG has an expense ratio of 0.04% and QQQ charges 0.20%.
Bottom-Line
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Vanguard Mega Cap Growth ETF (MGK): ETF Research Reports
Amazon.com, Inc. (AMZN): Free Stock Analysis Report
Apple Inc. (AAPL): Free Stock Analysis Report
Microsoft Corporation (NASDAQ:MSFT): Free Stock Analysis Report
Invesco QQQ (QQQ): ETF Research Reports
Vanguard Growth ETF (VUG): ETF Research Reports
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