If You Like Big Tech, You’ll Love This ETF That Lets You Invest in Microsoft, Nvidia And Apple At The Same Time
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Any S&P 500 Magnificent Seven stocks would be a welcome addition to any investor’s portfolio. Unfortunately for most investors, Magnificent Seven shares are so expensive that they’re largely out of reach if you’re not already wealthy (or close to it). Thankfully, that isn’t the case because of a unique exchange-traded fund (ETF) that allows you to own shares in four Magnificent Seven stocks simultaneously.
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The Vanguard Mega Cap Growth ETF heavily focuses on big tech, which accounts for 61.4% of the 71 stocks in the ETF’s portfolio. However, 45% of the ETF’s portfolio is invested in Apple (13.36%), Amazon (6.82%), Microsoft (12.35%) and Nvidia (12.52%). Apple, Microsoft and Nvidia are all at the forefront of the AI revolution, while Amazon has become a dominant force in e-commerce.
That’s impressive enough, but the Vanguard Mega Cap Growth ETF doesn’t stop there. Regarding weight allocation, every S&P 500 Magnificent Seven member is included in the Vanguard Mega Cap Growth ETF’s top ten. That means you’ll also be investing in Meta and Tesla. The fund also holds shares in market share and sector powerhouses like Eli Lilly, Visa, Costco and McDonalds.
All these companies offer products and services in high demand from large segments of the buying public. They also have a level of global recognition that is difficult to overestimate. According to Ycharts, the combined market cap of the S&P 500 Magnificent Seven is over $16 trillion. Ycharts data also shows that Magnificent Seven heavyweights Google, Nvidia and Microsoft are up by nearly 50% in 2024.
The same data also reveals the Magnificent Seven stocks have been responsible for 64.1% of the S&P 500’s market cap growth for the year. So, when you buy into the Vanguard Mega Cap Growth ETF, you buy shares in multiple companies that have grown rapidly throughout 2024. They also look set for continued growth in 2025 and beyond.
Trying to buy individual shares in these companies would be cost-prohibitive for all but the most successful everyday investors. However, you can buy Vanguard Mega Cap Growth ETF shares for $350.36 (according to Vanguard website). Vanguard’s public filings also indicate that the Mega Cap Growth ETF has increased in value by an incredible 35% in 2024.
The 10-year return (per Vanguard) is an impressive 16.30%, meaning this ETF also has potential as a buy-and-hold investment that can grow your wealth significantly. Although this ETF focuses more on growth than passive income, it currently pays a quarterly dividend of $0.374 per share. It’s easy to see the Vanguard Mega Cap Growth ETF’s potential when you look at the total package.
The downside risk is that the Vanguard Mega Cap Growth ETF’s continued performance is heavily tied to big tech’s fortunes. The AI revolution is pushing companies like Apple, Microsoft and Nvidia into the stratosphere regarding value, but nothing goes up forever. That’s why even though this ETF is highly diversified, putting all your eggs in this one basket may not be wise.
Lower interest rates mean some investments won’t yield what they did in months past, but you don’t have to lose those gains. Certain private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities.
