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Want to Buy Nvidia, Microsoft, and Apple? Consider This Vanguard Growth ETF
The S&P 500 (SNPINDEX: ^GSPC) is home to 500 different companies, but it’s weighted by market capitalization, which means the largest names in the index have a greater influence over its performance than the smallest.
Apple, Nvidia, and Microsoft are the top three companies in the S&P 500, with a combined market cap of $9.8 trillion, which represents 19.7% of the index. Nvidia stock, for example, was up 156% through the first half of 2024, which accounted for one-third of the entire 15% gain in the S&P 500.
In other words, investors who don’t have America’s tech giants in their portfolio are probably underperforming the broader market. But there’s a simple way to buy them without having to predict which ones might deliver the best returns from here.
The Vanguard Mega Cap Growth ETF (NYSEMKT: MGK) is an exchange-traded fund (ETF) with a concentrated portfolio filled with the largest tech stocks an investor could want. Here’s why it might be a great alternative to buying individual stocks.
The world’s highest-quality companies in one ETF
ETFs can hold hundreds, or even thousands, of different stocks. However, the Vanguard Mega Cap Growth ETF holds just 71, so it’s ideal for investors who already have an existing portfolio, but specifically want to add some exposure to the largest growth companies in America.
The ETF holds stocks from 10 different sectors of the economy, but technology has a whopping 61.4% weighting because of the sheer size of companies like Apple, Microsoft, and Nvidia.
In fact, the ETF is highly concentrated toward its top five holdings for that reason. The table shows their weightings in the ETF, compared to their weightings in the S&P 500 index:
|
Stock |
Vanguard ETF Portfolio Weighting |
S&P 500 Weighting |
|---|---|---|
|
1. Apple |
13.52% |
6.97% |
|
2. Microsoft |
12.68% |
6.54% |
|
3. Nvidia |
11.29% |
6.20% |
|
4. Meta Platforms |
4.96% |
2.41% |
|
5. Amazon |
4.54% |
3.45% |
Data source: Vanguard. Portfolio weightings are accurate as of Aug. 31, and are subject to change.
Having a much higher weighting toward these stocks can be a double-edged sword. It means the Vanguard ETF will outperform the S&P 500 when those specific stocks are doing well, but it’s likely to underperform if they hit a rough patch, because it lacks diversity relative to the index.
With that said, these five companies are among the most important players in the fast-growing artificial intelligence (AI) industry. Apple is rolling out its Apple Intelligence software, which it developed in partnership with OpenAI. It’s going to transform the way iPhone, iPad, and Mac users create and consume content. Since Apple has over 2.2 billion active devices worldwide, the company could soon become the biggest distributor of AI to consumers.
Microsoft and Amazon have developed their own AI virtual assistants, which are embedded into their flagship software products. Plus, the Microsoft Azure and Amazon Web Services cloud platforms are two of the largest AI distribution channels for businesses, allowing them to access ready-made models and data center computing power for their development needs.
Nvidia’s graphics processing chips (GPUs) for the data center are at the heart of the entire AI revolution. Its H100 GPU set the benchmark for AI developers last year, and the company is preparing to ship large volumes of its new Blackwell-based GPUs, which will deliver an incredible leap in performance and cost efficiency.
Outside its top five positions, the Vanguard ETF also holds popular megacap stocks like Eli Lilly, Tesla, Costco Wholesale, and McDonald’s — so it isn’t all about technology.
The Vanguard ETF consistently outperforms the S&P 500
The Vanguard ETF has delivered a compound annual return of 13.1% since it was established in 2007, which is much better than the average annual return of 10.2% in the S&P 500.
The ETF has delivered an even stronger compound annual return of 20.2% over the last five years. That’s because of the rapid adoption of technologies like cloud computing and AI, which have propelled stocks like Nvidia, Microsoft, and Amazon to multitrillion-dollar valuations. The S&P 500 has gained 16.7% per year (on average) over that same stretch.
In other words, if technology stocks continue to lead the broader market higher, investors should expect the Vanguard ETF to outperform the S&P 500 because of its enormous exposure to the sector. Some forecasts on Wall Street suggest AI could add anywhere from $7 trillion to $200 trillion to the global economy over the next decade. If that’s true, tech stocks will be one of the best places to invest.
Conversely, if AI fails to live up to the hype, the Vanguard ETF could underperform for a period of time because stocks like Nvidia would lose a chunk of the value they have created over the last couple of years.
This Vanguard ETF is very cheap to own, with an expense ratio of just 0.07% (the portion of the fund deducted each year to cover management costs), which is more than 90% cheaper than comparable funds, according to Vanguard. Therefore, investors seeking exposure to the big end of the stock market without having to pick individual winners and losers should look no further.
Should you invest $1,000 in Vanguard World Fund – Vanguard Mega Cap Growth ETF right now?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, 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. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, Costco Wholesale, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool 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.
Want to Buy Nvidia, Microsoft, and Apple? Consider This Vanguard Growth ETF was originally published by The Motley Fool
The habits of millionaires are a topic of interest when it comes to financial advice. After all, unless they received a large chunk of money as an inheritance or gift, most millionaires had to be smart with their money to get where they are.
Learning how millionaires accumulate wealth — and where they keep it — can provide valuable insights for anyone focused on growing their money. One common question is whether or not millionaires keep money in checking accounts.
Studies show that in recent years, millionaires are keeping a significant portion of their wealth in cash. According to CNBC’s , that portion was about 24% in 2023. While this doesn’t necessarily mean a quarter of a millionaire’s wealth is sitting in a checking account, it does indicate the importance of maintaining liquid assets. And a checking account can be a helpful tool for doing so — whether or not you’re a millionaire.
Anyone, regardless of net worth, can find value in a checking account. Checking accounts allow unlimited deposits and withdrawals, check writing, bill pay, and other features to help you manage your money day-to-day.
While millionaires may keep large portions of their wealth in other deposit accounts and investments, some may use a checking account to manage daily spending. Millionaires also recognize the importance of having liquid assets, like funds in checking and savings accounts. Accessible cash lets you cover unexpected expenses without needing to sell off investments, borrow money, or pay a penalty for tapping your retirement savings early.
The amount of money a millionaire keeps in their checking account is highly personal and depends on preference. However, because checking accounts rarely earn competitive — if any — interest, some millionaires intentionally limit their checking account balance. Some may choose to keep the bare minimum, such as a couple of months’ worth of essential expenses, in their checking accounts, keeping the rest of their wealth in more lucrative assets.
Regardless of preference, it would be surprising for a millionaire to keep more than $250,000 in a single checking account. That’s because the Federal Deposit Insurance Corp. (FDIC) only insures up to $250,000 in deposits per institution, per account holder.
While millionaires may use checking accounts for day-to-day financial transactions, they may also use some of the following accounts in addition to, or in place of, a checking account:
-
Savings accounts: Like checking accounts, savings accounts provide a high degree of liquidity, allowing you to access your money as needed for regular or unexpected expenses. High-yield savings accounts, in particular, give millionaires an extra bang for their buck. Some of the best accounts currently offer rates upwards of 4% versus the national average savings account rate of 0.46%.
-
Cash management accounts: Cash management accounts (CMAs) pay competitive interest rates while maintaining more accessibility than a savings account. Some CMAs come with a debit card and ATM access, and many provide extended FDIC coverage limits by “sweeping” additional deposits into partner banks. CMAs are available at brokerages, not banks, facilitating easy transfers between investment and cash accounts.
-
Money market accounts: Similar to CMAs, money market accounts combine features of checking and savings accounts, often paying competitive interest rates and providing check writing and ATM access. Banks and credit unions offer these accounts, which are federally insured. Minimum opening deposit and minimum balance requirements are often higher than those for standard savings accounts.
-
Retirement and tax-advantaged accounts: Millionaires understand the importance of investing for their later years, and retirement accounts such as 401(k)s and IRAs allow them to do so in a tax-advantaged way. Some retirement accounts, like 401(k)s, are offered by certain employers. Others, such as traditional and Roth IRAs, are available to anyone.
-
Brokerage accounts: The IRS limits contributions to tax-advantaged accounts, and millionaires typically invest beyond these limits. They do so with taxable brokerage accounts, which can hold investments such as stocks, bonds, and mutual funds without contribution limits.
-
Other investments, like real estate, commodities, and art: Some millionaires may decide to diversify their portfolio with other investment types. These could include real estate investments, such as investment properties or real estate investment trusts (REITs); commodities, such as metals or energy products; art; and more.
The amount of money millionaires keep in their checking accounts depends on personal preference. While some millionaires may keep six figures in their checking account to maintain a comfortable cash cushion, others may choose to keep the bare minimum in checking. You wouldn’t expect millionaires to keep more than $250,000 in a checking account, however, because balances over this threshold aren’t typically insured.
There’s no single bank that’s a favorite among millionaires; it’s another matter of preference. However, millionaires are likely to bank with institutions that offer private banking to those who meet specific financial requirements. Private banking may include wealth planning services, waived fees, dedicated bankers, and additional perks. J.P. Morgan Private Bank, Citi Private Bank, and Bank of America Private Bank are among some of the most popular banks for millionaires.
Billionaires may have checking accounts, but they likely use accounts that cater to ultra-high-net-worth individuals. These accounts may come with perks such as a dedicated banker, waived fees, and competitive interest rates. Alternatively, billionaires may opt for a cash management account with higher FDIC insurance coverage limits and checking account features.
No rule says you can’t have a million dollars in a checking account, but FDIC insurance typically only covers up to $250,000. Plus, you can get a bigger return on your investment by keeping $1 million elsewhere. One alternative is a cash management account, which acts like a checking account but generally earns higher interest. Plus, many cash management accounts insure more than the standard $250,000 by sweeping funds into multiple partner banks.
Lumen Technologies, Inc. (NYSE:LUMN) shares are trading higher on Monday after the company announced it is partnering with Meta Platforms, Inc. (NASDAQ:META) to significantly increase Meta’s network capacity and help drive its AI ambitions.
Lumen’s partnership offers Meta enhanced flexibility with secure, on-demand bandwidth, supporting its complex computing requirements and enabling it to serve billions daily.
Ashley Haynes-Gaspar, Lumen’s EVP and chief revenue officer, said, “We’ve transformed our company to meet this demand. As Meta’s customers use more AI services across its platforms, we’re helping provide Meta with a seamless, effortless, and flexible network that will meet its growing needs.”
Lumen Technologies said its Private Connectivity Fabric enables long-term network capacity for Meta’s AI.
Alex-Handrah Aimé, director of Meta’s Network Investments stated, “Our AI tools are performing increasingly more complex tasks including enabling conversations in a variety of languages and translating text to images in real time, while helping people interact with the world around them in new, immersive ways.”
Lumen will report third quarter 2024 results on November 5, 2024.
Investors can gain exposure to the stock via Invesco S&P SmallCap Utilities & Communication Services ETF (NASDAQ:PSCU) and First Trust Cloud Computing ETF (NASDAQ:SKYY).
Price Action: LUMN shares are up 9.50% at $7.38 at the last check Monday.
Image via Shutterstock
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This article Lumen And Meta Join Forces To Boost AI With Flexible, On-Demand Network Solutions originally appeared on Benzinga.com
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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