Want to Buy Nvidia, Microsoft, and Apple? Consider This Vanguard Growth ETF

The S&P 500 (SNPINDEX: ^GSPC) is home to 500 different companies, but it's weighted by market capitalization, which means the largest names in the index have a greater influence over its performance than the smallest.

Apple, Nvidia, and Microsoft are the top three companies in the S&P 500, with a combined market cap of $9.8 trillion, which represents 19.7% of the index. Nvidia stock, for example, was up 156% through the first half of 2024, which accounted for one-third of the entire 15% gain in the S&P 500.

In other words, investors who don't have America's tech giants in their portfolio are probably underperforming the broader market. But there's a simple way to buy them without having to predict which ones might deliver the best returns from here.

The Vanguard Mega Cap Growth ETF (NYSEMKT: MGK) is an exchange-traded fund (ETF) with a concentrated portfolio filled with the largest tech stocks an investor could want. Here's why it might be a great alternative to buying individual stocks.

The world's highest-quality companies in one ETF

ETFs can hold hundreds, or even thousands, of different stocks. However, the Vanguard Mega Cap Growth ETF holds just 71, so it's ideal for investors who already have an existing portfolio, but specifically want to add some exposure to the largest growth companies in America.

The ETF holds stocks from 10 different sectors of the economy, but technology has a whopping 61.4% weighting because of the sheer size of companies like Apple, Microsoft, and Nvidia.

In fact, the ETF is highly concentrated toward its top five holdings for that reason. The table shows their weightings in the ETF, compared to their weightings in the S&P 500 index:

Data source: Vanguard. Portfolio weightings are accurate as of Aug. 31, and are subject to change.

Having a much higher weighting toward these stocks can be a double-edged sword. It means the Vanguard ETF will outperform the S&P 500 when those specific stocks are doing well, but it's likely to underperform if they hit a rough patch, because it lacks diversity relative to the index.

With that said, these five companies are among the most important players in the fast-growing artificial intelligence (AI) industry. Apple is rolling out its Apple Intelligence software, which it developed in partnership with OpenAI. It's going to transform the way iPhone, iPad, and Mac users create and consume content. Since Apple has over 2.2 billion active devices worldwide, the company could soon become the biggest distributor of AI to consumers.