You Need to Know About VIGAX (Vanguard Growth Index Fund)

VIGAX stands for Vanguard Growth Index Fund Admiral Shares. It’s similar to the ever-popular VTSAX in that it’s a low-fee index fund (expense ratio of 0.05%).

The goal of VIGAX is to pick high-growth, large-cap companies that offer a potentially higher reward, but also a potentially higher risk. In short, VIGAX is more volatile than some of the other index funds Vanguard offers.

Let’s take a deep dive into VIGAX and why it deserves your attention.

VIGAX Outperforms the S&P 500

For people who claim you can’t beat “the market,” VIGAX will have you reconsider. Take a look at the image below. It’s the 10-year performance of VIGAX vs S&P 500.

It’s actually the growth of $10,000 over that period of time. You can see that VIGAX has largely outperformed the S&P 500 almost every year.

This coupled with the low-fee nature of VIGAX makes it a very exciting index fund to consider in your retirement portfolio.

VIGAX vs S&P 500.PNG

VIGAX is a Low-Fee Index Fund

The expense ratio for VIGAX is 0.05%. This is a fraction of what actively managed funds will cost. According to Vanguard, the average expense ratio of similar funds is over 1%.

High fees will eat away at your gains and have little to no proven benefit over low-fee funds like VIGAX or VTSAX.

For individuals wanting to passively invest for retirement, whether being involved in the FIRE movement or simply looking for a great asset to grow their nest egg, VIGAX is a great low-fee choice.

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Low-fee index funds capitalize on the fact that the market tends to go up over time and consistent “dollar-cost-averaging” wins in the end.

CRSP U.S. Large Growth Index

VIGAX tracks the CRSP U.S. Large Growth Index.

According to the Center for Research in Security Prices (CRSP), “CRSP classifies growth securities using the following factors: future long-term growth in earnings per share (EPS), future short-term growth in EPS, 3-year historical growth in EPS, 3-year historical growth in sales per share, current investment-to-assets ratio, and return on assets.”

What Stocks Does VIGAX Hold?

The Vanguard Growth Index Fund invests in stocks of large U.S. companies in market sectors that tend to grow more quickly than the broad market. Not only does VIGAX hold the stocks in the image, but it also holds 280 other companies.

Below are the top 10 holdings of VIGAX as of 9/30/2019. These 10 holdings constitute 40.40% of the total holdings of VIGAX.

VIGAX holdings.PNG

What Sectors Does VIGAX Represent?

VIGAX holdings are largely made up of technology, consumer services, industrials, and financial companies. This makes sense if you remember the goal of VIGAX.

VIGAX aims to hold high-growth companies. These are companies that are increasing their revenue year over year with a lot of potential upsides.

With VIGAX, you’re getting strong growth out of the technology sector (think AI and machine learning) and diversification with consumer services with a good amount of exposure in financials and industrials.

I like having strong exposure to financials because let’s face it, consumer debt isn’t going away. Humans are more materialistic today ad debt is easier than ever to access.

Image of VIGAX sector diversification.

VIGAX Minimum Initial Investment

The initial investment required to invest in VIGAX is $3,000. Each subsequent investment minimum is $1. This means that once you make the first $3,000 investment, you can then invest as little or as much as you’d like.

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If you’re considering VIGAX or VTSAX (same minimum), I would just save the cash in your retirement account or put it into a general lifecycle fund. Once your account is over the $3,000 minimum, you can then re-balance your portfolio into VIGAX.

Vanguard Growth ETF (VUG)

If you want to avoid the minimum initial investment of VIGAX, you can also purchase its corresponding exchange-traded fund (ETF) for the price of one share. ETF’s offer some key differences from index funds and are definitely worth learning more about. Check out this comparison between VTSAX and VTI.

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