Forget the Nasdaq -- Buy This Magnificent ETF Instead

Semiconductor giant Nvidia was recently up 155% year to date, and server-and-storage specialist Super Micro Computer was up 208%. We'd all love to have picked these stocks for our portfolios -- ideally long ago. But most of us are not savvy stock pickers, and even if we are, big wins are not guaranteed. Many growth stocks that we might pursue will end up disappointing us.

An excellent alternative is a low-fee, broad-market index fund , such as one that tracks the S&P 500 index . Many people might also consider a fund focused on the Nasdaq stock market , because the Nasdaq is home to lots of great growth companies, such as Nvidia, Apple , and Microsoft . Go ahead and consider such funds, but consider this magnificent ETF, too: the Vanguard S&P 500 Growth ETF (NYSEMKT: VOOG) . Here's why.

Image source: Getty Images.

Meet the Vanguard S&P 500 Growth ETF

It's hard to argue about the value of investing via a solid S&P 500 index fund. It can truly be all you need in order to amass a war chest for retirement . But if you want and you can handle a little more risk, you could aim for a higher potential return -- perhaps by investing a portion of your long-term portfolio in the Vanguard S&P 500 Growth ETF. (An exchange-traded fund (ETF) is a security that's very much like a mutual fund, but it trades like a stock.)

The Vanguard S&P 500 Growth ETF is an index fund -- one that tracks the Standard & Poor's 500 Growth Index, which features growth stocks from the S&P 500 index. To determine which companies in that index qualify as growth stocks for the growth index, it considers three factors: sales growth, the ratio of earnings change to price, and momentum.

Here's the ETF's track record. I'll compare it with a regular S&P 500 ETF's performance -- which is also quite solid:

Source: Morningstar.com as of July 19, 2024.

What's in the Vanguard S&P 500 Growth ETF?

The Vanguard S&P 500 Growth ETF is worth considering if you'd like extra exposure in your portfolio to fast growers. Here are the recent top 10 holdings of the fund, along with how much of the fund's value each stock represents:

Source: Morningstar.com.

The table above gives you a good idea of the kinds of holdings in the ETF and reveals some other things, too. For example, look at those weightings. The fund recently held about 232 different stocks, but the top 10 holdings represented fully 60% of its total assets. There's close to six times as much Microsoft in the ETF as there is Tesla, and much more Tesla than scores of other holdings.

When you have your own portfolio of stocks, you can allocate your assets just how you want them, but when you buy this fund -- or any other fund -- the fund managers or the index that the fund tracks, will determine what the fund holds, and in what proportion.

Here are the top few sectors represented in the Vanguard S&P 500 Growth ETF:

Source: Morningstar.com.

So consider adding the Vanguard S&P 500 Growth ETF to your portfolio if you're looking for more firepower. Remember that its future performance may be worse -- or better -- than its past performance. And know, too, that there are plenty of other ETFs with impressive track records . You needn't focus just on the Nasdaq stock market. Instead, seek solid performers -- many of which are loaded with Nasdaq stocks.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Selena Maranjian has positions in Alphabet, Amazon, Apple, Broadcom, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. 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 .