Billionaires Buy a Brilliant Vanguard Index Fund That Could Turn $500 Per Month Into $442,400 With Help From the "Magnificent Seven" Stocks

Key Points

• A few wealthy hedge fund managers added shares of the Vanguard Mega Cap Growth ETF in the second quarter.

• The Vanguard Mega Cap Growth ETF has nearly 60% of its assets invested in "Magnificent Seven" stocks.

• The Vanguard Mega Cap Growth ETF has returned 669% since its inception, compounding at 12.2% annually.

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Recently filed Forms 13F indicate these billionaire-led hedge funds bought shares in the Vanguard Mega Cap Growth ETF (NYSEMKT: MGK) during the second quarter:

• Cliff Asness' AQR Capital Management added 6,205 shares, doubling its stake.
• Ken Griffin's Citadel Advisors added 10,498 shares, starting a small position.
• David Shaw's D.E. Shaw added 8,190 shares, starting a small position.

While none of these hedge funds have particularly large positions in the Vanguard Mega Cap Growth ETF, it's still a worthwhile holding as part of a diversified portfolio. The index fund provides heavy exposure to the "Magnificent Seven" stocks, and history says it can turn $500 per month into $442,400 in the next 20 years.

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Vanguard Mega Cap Growth ETF is heavily invested in the "Magnificent Seven" stocks

The Vanguard Mega Cap Growth ETF tracks 69 large U.S. companies that account for 70% of U.S. equities by market value. In particular, the index fund is focused on growth-oriented stocks in the technology sector, but a large percentage of its assets are also invested in the consumer discretionary sector.

Here are the top 10 holdings in the Vanguard Mega Cap Growth ETF, listed by weight:

1. Nvidia: 14.4%
2. Microsoft: 13.9%
3. Apple: 10.8%
4. Amazon: 7.7%
5. Broadcom: 4.9%
6. Meta Platforms: 4.6%
7. Alphabet: 4.5%
8. Tesla: 3.1%
9. Eli Lilly: 2.3%
10. Visa: 2.2%

The Vanguard Mega Cap Growth ETF has nearly 60% of its assets in the "Magnificent Seven" stocks, some of the most competitively advantaged and fundamentally sound companies in the world. Compared to the other 493 members of the S&P 500 (SNPINDEX: ^GSPC), the "Magnificent Seven" have consistently reported faster earnings growth, as detailed below:

• The "Magnificent Seven" reported earnings growth of 31% in 2023, while the remaining 493 companies in the S&P 500 reported an earnings decline of 4%.
• The "Magnificent Seven" reported earnings growth of 40% in 2024, while the remaining 493 companies in the S&P 500 reported an earnings decline of 4%.

More importantly, Wall Street analysts expect the "Magnificent Seven" to keep outperforming the other S&P 500 companies through at least 2026 as the artificial intelligence (AI) market expands.

The Vanguard Mega Cap Growth ETF could turn $500 per month into $442,400 in 20 Years

The Vanguard Mega Cap Growth ETF has returned 669% since its inception in December 2007, which is equivalent to 12.2% annually over the last 18 years. That period covers such a broad range of economic and market conditions -- two recessions, three bear markets, and eight market corrections -- that investors can reasonably expect similar returns in the future.

Assuming the index fund continues to gain 12.2% annually, $500 invested monthly would be worth $106,300 in one decade and $442,400 in two decades. But some investors may prefer to save more or less. The chart details how different monthly contribution amounts would grow over time, assuming the index fund returns 12.2% annually.

Returns determined with the investor.gov compound interest calculator. Table by author.

The last item of consequence is the expense ratio. The Vanguard Mega Cap Growth ETF has a reasonable expense ratio of 0.07%, meaning shareholders will pay $7 per year on every $10,000 invested in the fund.

In summary, I would characterize this index fund as a cheap, easy way to get exposure to the largest U.S. stocks, including the Magnificent Seven.

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Trevor Jennewine has positions in Amazon, Nvidia, Tesla, and Visa. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Tesla, and Visa. The Motley Fool recommends Broadcom and 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.