1 Unstoppable ETF I'm Buying and Holding for Decades -- Even if the Stock Market Crashes
The long-term growth potential of growth stocks outweighs the risks of short-term volatility.
The Vanguard Morningstar Growth ETF (VUG) has delivered exceptional returns over the past four years, with a 150% gain since the beginning of 2023. However, its heavy investment in technology stocks, currently accounting for 72% of the portfolio, and the AI-driven market boom that has fueled this growth could be detrimental during a stock market crash.
Despite this risk, the potential for above-average long-term returns, even amidst volatility, is enough to warrant holding this fund for decades. The ETF tracks an index that targets stocks based on fundamental factors like historical and forecast earnings growth, revenue growth, return on assets (ROA), and debt levels. This strategy invests in stocks that have performed well historically and are expected to continue this trend.
The fund's adaptability is a significant advantage, as it can adjust to emerging sectors or themes to increase allocations in the index. Over its 22-year existence, the Vanguard Morningstar Growth ETF has experienced three major bear markets, including losses of over 50% during the financial crisis, nearly 30% during the COVID-19 pandemic, and more than 30% during the 2022 bear market.
However, it has still managed to return more than 12% annually, even with these drawdowns. This demonstrates that short-term volatility shouldn't deter a long-term strategy. While growth stocks can experience significant lows, this fund has consistently delivered above-average returns for over two decades. Selling or attempting to time the market during market crashes is likely to harm returns.
Instead, hodling through market crashes and buying shares at discounted prices can actually improve long-term returns. Consistent auto-investment plans can also capitalize on this potential. Despite the risk of crashes, the long-term potential of the Vanguard Growth ETF makes it a compelling investment option. For better investing strategies, The Motley Fool's premium services offer stock recommendations and portfolio guidance.
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