Make Money in Megacap Growth Stocks the Easy Way

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect large companies to keep growing, especially as our global economy eventually gets back on track, the Vanguard Mega Cap 300 Growth Index ETF (NYS: MGK) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The Vanguard ETF's expense ratio -- its annual fee -- is a very low 0.13%.

This ETF has performed well, but it's also very young. In just three full years on the books, it's averaged 3.1% annually, vs. 1.1% for the S&P 500. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.

With a low turnover rate of 21%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.

What's in it?
Several of this ETF's components made strong contributions to its performance over the past year. Phillip Morris International gained about 34% this past year. Its volume hasn't been growing as briskly as many would want, but income has been growing well, partly because of price hikes. While the percentage of smokers in the U.S. has been shrinking, presenting issues for domestic Altria (NYS: MO) , the pool of smokers abroad will likely grow faster as developing economies flourish.

Other companies didn't add as much to the ETF's returns last year, but could have an effect in the years to come. Cisco Systems (NAS: CSCO) , for instance, declined by roughly 23%. The company seems to have come unmoored recently, losing ground to competitors such as Brocade Communications (NAS: BRCD) and Riverbed Technology (NAS: RVBD) . It's been retooling itself to shed less vital businesses, lay off several thousand workers, and reduce its overhead. For all its problems, many investors find the stock just too cheap to ignore at recent levels.

Ford (NYS: F) , meanwhile, slipped about 11%. It's turning itself around successfully while facing arguing the best kind of problem: more demand than supply. Ford's increasing its manufacturing capacity to keep up; as long as demand remains strong, it should do fine.

The big picture
A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.

ETFs can help you find the way to better investing results. To find some great ETF investing ideas, take a look at The Motley Fool's special free report, "3 ETFs Set to Soar During the Recovery."

At the time thisarticle was published The Motley Fool owns shares of Philip Morris International, Ford, Cisco, and Altria, as well as having created a bull call spread position on Cisco Systems.Motley Fool newsletter serviceshave recommended buying shares of Ford, Cisco, Philip Morris International, and Riverbed Technology, along with writing puts on Riverbed Technology. Try any of our Foolish newsletter servicesfree for 30 days.LongtimeFool contributorSelena Maranjianowns shares of Ford Motor and Riverbed Technology, but she holds no other position in any company mentioned.Click hereto see her holdings and a short bio. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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