Looking for broad exposure to the Large Cap Growth segment of the US equity market? You should consider the Vanguard Mega Cap Growth ETF (MGK), a passively managed exchange traded fund launched on 12/17/2007.
The fund is sponsored by Vanguard. It has amassed assets over $10.36 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. Overall, they are usually a stable option, with less risk and more sure-fire cash flows than mid and small cap companies.
Growth stocks have higher than average sales and earnings growth rates. While these are expected to grow faster than the broader market, they also have higher valuations. Further, growth stocks have a higher level of volatility associated with them. 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
When considering an ETF’s total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
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 0.57%.
Sector Exposure and Top Holdings
ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund’s holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Information Technology sector–about 53.50% of the portfolio. Consumer Discretionary and Telecom round out the top three.
Looking at individual holdings, Apple Inc. (AAPL) accounts for about 15.30% of total assets, followed by Microsoft Corp. (MSFT) and Amazon.com Inc. (AMZN).
The top 10 holdings account for about 58.78% 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 has lost about -29.34% so far this year and is down about -21.53% in the last one year (as of 07/13/2022). In the past 52-week period, it has traded between $175.67 and $264.33.
The ETF has a beta of 1.09 and standard deviation of 27.93% for the trailing three-year period, making it a medium risk choice in the space. With about 110 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 excellent 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 $67.81 billion in assets, Invesco QQQ has $156.30 billion. VUG has an expense ratio of 0.04% and QQQ charges 0.20%.
Bottom-Line
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
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
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