This Growth ETF Has Crushed the S&P 500 Since 2004. Here's Why It's Still a Buy.

For growth investors, accumulating wealth is the ultimate objective, whether through individual stocks or exchange-traded funds (ETFs). However, the S&P 500 (^GSPC +2.35%) remains the industry standard for benchmarking performance. One ETF that consistently exceeds the S&P 500 since its inception in January 2004 is the Vanguard Morningstar Growth ETF (VUG +2.77%).

Over this period, it has delivered an impressive 895% return compared to the S&P 500's 539%. While the future remains uncertain, current trends suggest that this upward trajectory may persist.

VUG comprises 135 large-cap growth stocks spanning all major sectors, with a heavy emphasis on technology (72.1%). This focus aligns with its growth-oriented philosophy, but it also provides a buffer across other sectors. Its top 10 holdings are predominantly technology companies, including several of the so-called "Magnificent Seven" stocks. The top 20 holdings further include blue-chip companies like Eli Lilly, Visa, Mastercard, and Costco Wholesale.

Despite its heavy concentration in tech, VUG has historically performed well when the sector flourishes. However, during downturns, it can also underperform significantly. Currently, VUG is down 11% from its peak in the past month, and the Nasdaq Composite is officially in correction territory as of Nov. 6. Investors may question if this is the opportune moment to invest, especially with looming bear market fears and heightened uncertainty.

While predicting market movements is impossible (particularly in the short term), I firmly believe that VUG will weather the storm. It has survived three bear markets - the financial crisis, the COVID-19 pandemic, and the 2022 bear market - and has rebounded each time.

Past performance does not guarantee future results, so we cannot assume that VUG will continue its current trajectory. However, the companies driving its growth are positioned to succeed in the long run. This doesn't mean there won't be setbacks and rough patches along the way, but the long-term outlook matters more than short-term fluctuations.

I would not recommend investing a lump sum in VUG right now due to the inherent volatility. Nevertheless, it may be an opportune time to start a position or gradually increase an existing investment. For comprehensive investment strategies, consider The Motley Fool's premium services.