10 Stocks Make Up 60% of This $220 Billion Vanguard ETF. Here's What That Means If the AI Trade Cracks.

The Vanguard Growth ETF (NYSEMKT: VUG) holds 147 stocks. That sounds like diversification, and it's part of why investors have parked more than $220 billion in the fund. But look at where the money actually sits. As of June 30, the fund's 10 largest holdings accounted for about 60% of its assets.

Strictly speaking, those 10 stocks represent nine companies, since Alphabet appears twice through its two share classes. Either way, the arithmetic is the same: For every dollar invested in this fund, about 60 cents ride on fewer than a dozen names, most of them tied to the AI (artificial intelligence) trade.

That's not a criticism of the fund. It's simply what the fund has become. And with AI stocks wobbling hard this month, I think it's worth spelling out exactly what investors in this popular growth fund actually own.Continue reading