Explore the Top-Performing Vanguard Index Funds of 2024's Standouts
Vanguard was established in 1975 by index fund advocator John Bogle, and it's now the world's second-largest asset manager. Here are the two Vanguard index funds that have delivered the highest returns this year (as of Nov.):
- The Vanguard Financial ETF (VFH) has returned 34%.
- The Vanguard S&P 500 Growth ETF (VOOG) has returned 33%.
Purchasing index funds is a simple method for investors to follow the market's overall performance, sector-specific developments, and certain equity types. Below, you can read more about the two index funds mentioned above.
1. Vanguard Financial ETF: 34% return year to date
The Vanguard Financial ETF monitors the performance of 404 U.S. businesses within the financial sector, which has been the second-best-performing market sector in the S&P 500 this year due to inexpensive valuations and assumptions about President-elect Trump relaxing banking regulations.
The companies included in the Vanguard Financial ETF participate in various financial activities, ranging from lending and transactions to insurance and asset management. The five largest holdings within the index fund, ranked by weight, are listed below:
- JPMorgan Chase: 8.5%
- Berkshire Hathaway: 8%
- Mastercard: 5.5%
- Visa: 4.2%
- Bank of America: 3.9%
These top firms account for roughly 30% of the Vanguard Financial ETF, demonstrating a diverse selection of established companies. JPMorgan Chase and Bank of America are the two largest U.S. banks by assets, while Berkshire Hathaway is one of the largest insurance firms. Mastercard and Visa are the top card-payment companies in the U.S.
Although the Vanguard Financial ETF has outperformed the S&P 500 this year, its five-year return of 84% still lags behind the S&P 500's five-year return of 105%. The index fund has an expense ratio of 0.1%, which makes it more expensive than most S&P 500 index funds. For example, the Vanguard S&P 500 ETF has an expense ratio of 0.03%.
Personally, I prefer investing in an all-encompassing index fund that follows the entire S&P 500 rather than one that focuses on a specific sector, such as the financial sector. Additionally, I believe John Bogle, Vanguard's founder, would concur. He once said, "The fundamentals of investment success involve investing in the entire stock market through an index fund, and then remaining passive."
2. Vanguard S&P 500 Growth ETF: 33% return year to date
The Vanguard S&P 500 Growth ETF tracks the performance of 234 U.S. companies within the S&P 500 index that are categorized as growth stocks—they demonstrate robust revenue growth, earnings growth, and market value appreciation. The index fund has the majority of its investments in the technology (50%), consumer discretionary (14%), and communications services (13%) sectors.
The five largest holdings in the Vanguard S&P 500 Growth ETF, listed by weight, are:
- Apple: 12.5%
- Nvidia: 11.9%
- Microsoft: 11%
- Amazon: 6.3%
- Meta Platforms (Facebook): 4.5%
These top stocks account for approximately 46% of the Vanguard S&P 500 Growth ETF, and they could all benefit from an increase in artificial intelligence (AI) spending. Apple has incorporated AI features into its iPhones and MacBooks, while Nvidia's graphics processing units (GPUs) are the industry standard in AI accelerators. Microsoft and Amazon lead the public cloud market, while Meta Platforms (Facebook) is leveraging AI to enhance user engagement across its social media platforms.
The Vanguard S&P 500 Growth ETF is not only beating the S&P 500 in annual returns, but its five-year return of 125% exceeds the S&P 500's five-year return of 105%. While this growth-focused ETF has an expense ratio of 0.1%, making it more expensive than the Vanguard S&P 500 ETF, the additional fees wouldn't offset the outperformance.
In conclusion, while investing in a broad-based S&P 500 index fund is usually a better choice for most investors, risk-tolerant individuals with a long-term perspective (at least three to five years) could consider supplementing their S&P 500 index fund with a growth-focused ETF to capitalize on the anticipated surge in AI spending in the upcoming years.
Investors who are interested in the financial sector may find the Vanguard Financial ETF appealing, as it has delivered a strong 34% return this year. This ETF focuses on companies within the financial sector, which has been one of the top-performing market sectors due to inexpensive valuations and potential regulatory changes.
Managing your finances wisely and making informed investment decisions can lead to significant Returns on Investment (ROI). For instance, by considering investing in index funds like the Vanguard Financial ETF, you can follow the market's overall performance and benefit from its growth.
