Thanks to their extremely low management fees, Vanguard's exchange-traded funds (ETFs) are consistently on the radars of investors keen on maximizing the returns on their investments -- and not losing money to fund managers.
But which Vanguard ETFs represent compelling options for investors looking to invest $1,000 and keep their positions indefinitely? Fortunately, the Vanguard S&P 500 Growth ETF(NYSEMKT: VOOG), Vanguard Dividend Appreciation ETF(NYSEMKT: VIG), and Vanguard Mega Cap Growth ETF(NYSEMKT: MGK) all represent great opportunities that will appeal to a variety of interests.
A market-beating ETF that provides growth investors with AI exposure... and more
Even if you follow the market superficially, you know that artificial intelligence (AI) stocks have been all the rage. It's unsurprising, therefore, that the Vanguard S&P 500 Growth ETF has outpaced the S&P 500's 13.9% gain over the past year, climbing 17.2%. The ETF is composed of growth stocks in the S&P 500, and the top seven holdings are all "Magnificent Seven" stocks -- all of which provide AI exposure in their own ways. Semiconductor stalwart Nvidia represents the largest position with an 11.1% weighting, while Apple and Microsoft round out the top three positions with weightings of 6.2% and 6%, respectively.
With 209 holdings, there are also many stocks not focused on AI, so if AI enthusiasm tapers off, there are plenty of other stocks that can pick up the reins and drive the ETF higher. Financials stocks, for example, figure prominently in the fund with a 12.4% weighting. Visa, MasterCard, and JPMorgan Chase are among the top 13 positions.
The Vanguard S&P 500 Growth ETF has a 0.07% expense ratio and it makes distributions on a quarterly basis.
Put more passive income in your portfolio with the Vanguard Dividend Appreciation ETF
Looking to ramp up your dividend income? The Vanguard Dividend Appreciation ETF is a great option. Because the fund has a low expense ratio -- only 0.05% -- investors don't lose a large amount of the passive income that the fund generates to management fees. Currently, the ETF provides a 1.66% 30-day SEC yield, higher than the S&P 500 yield of 1.27%.
With 337 holdings, the ETF balances a conservative approach to income investing with the upside of companies dedicated to growing their dividends. Focusing on large-cap stocks, the Vanguard Dividend Appreciation ETF prioritizes companies that have raised their dividends for the past 10 consecutive years. Semiconductor specialist Broadcom is the largest position in the ETF, while Apple, JPMorgan Chase, Microsoft, and Visa round out the top five positions.
It's no small feat for a business to consistently raise dividends for a decade, so investors are largely gaining access to well-run companies. Those content to maintain their positions in the Vanguard Dividend Appreciation ETF for the long haul have the potential to see their investments grow considerably thanks to businesses committed to rewarding shareholders.
The Vanguard Mega Cap ETF has been a mega success since its inception
Don't let the poor performance of the Vanguard Mega Cap ETF fool you. While the fund has dropped 5.7% since the start of the year -- plunging further than the S&P 500's 1.7% decline -- over the long term it has performed brilliantly. Since its inception in December 2007, the Vanguard Mega Cap ETF has soared 675% higher, far outpacing the 445% gain in the S&P 500 during the same period.
Characterizing itself as "a convenient way to get diversified exposure to the largest growth stocks in the U.S. market," the Vanguard Mega Cap ETF is focused on big stocks with big growth potential. The median market cap of the 69 stocks in the ETF, for example, is $1.7 trillion. Unsurprisingly, tech stocks make up the lion's share of the holdings, about 59.8%. Apple, Microsoft, and Nvidia are the top three positions in the ETF, with a combined weighting of 34.8%.
There's no guarantee that the Vanguard Mega Cap ETF will continue to skyrocket ahead of the S&P 500 at the same pace as it has for the past 18 years, but it certainly wouldn't be surprising if it did. While the fund's distributions are low (the 30-day SEC yield is 0.39%), they more than cover the 0.07% expense ratio.
Which Vanguard ETF is right for you?
With low expense ratios, these three ETFs are great options for budget-conscious investors who are looking to buy and hold for the long term. For those interested in a more measured approach to growth stocks, the Vanguard S&P 500 Growth ETF will be appealing, yet those on the prowl for higher growth potential will want to dig deeper into the Vanguard Mega Cap ETF. OF course, if generating passive income is a priority, the Vanguard Dividend Appreciation ETF will be a more enticing option.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, JPMorgan Chase, Mastercard, Microsoft, Nvidia, Vanguard Dividend Appreciation ETF, and Visa. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
