Want to Invest in Top Growth Stocks Like Amazon, Apple, and Microsoft but Avoid Nvidia? Consider This Low-Cost Vanguard ETF That’s Up 24.8% This Year.

Investors who want to avoid Nvidia (NASDAQ:NVDA) but put capital to work in growth-focused, exchange-traded funds (ETFs) face a difficult challenge. Nvidia is an integral part of index funds and exchange-traded funds (ETFs) -- as the second-largest S&P 500 (SNPINDEX:^GSPC) and Nasdaq Composite (NASDAQINDEX:^IXIC) holding behind Apple (NASDAQ:AAPL). Nvidia also joined the Dow Jones Industrial Average (DJINDICES:^DJI) in 2024. And Nvidia carries an especially high weighting in many growth ETFs and tech sector ETFs.

However, there is a unique low-cost Vanguard ETF that doesn't own Nvidia yet still holds Amazon (NASDAQ:AMZN), Apple, and Microsoft (NASDAQ:MSFT) as its top three holdings.

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A value ETF for the modern market

The Vanguard Russell 1000 Value ETF (NASDAQ:VONV) is a modern take on value stocks. While the Vanguard Growth ETF, Vanguard S&P 500 Growth ETF, and Vanguard Mega Cap Growth ETF label most major tech-focused companies as growth stocks, the Vanguard Russell 1000 Value ETF takes a nuanced approach.

The Russell 1000 is the 1,000 largest U.S. listed companies by market cap. It includes smaller large-cap and mid-cap stocks, whereas the S&P 500 just has large-cap stocks.

FTSE Russell, a subsidiary of the London Stock Exchange Group, has a semi-annual reconstitution whereby it roughly splits the market cap weighting of the Russell 1000 into two indexes -- the Russell 1000 Value Index (which the Vanguard Russell 1000 Value ETF tracks) and the Russell 1000 Growth Index -- which is mirrored by the Vanguard Russell 1000 Growth ETF. If FTSE Russell categorized all tech-focused companies as growth stocks, then the growth index would have a far higher market cap than the value index. So instead, FTSE Russell categorizes some established companies that were formerly high-octane growth stocks as value stocks, like Amazon, which is in the value index and not the growth index. Some stocks have their market caps split between both indexes. For example, Apple and Microsoft are top holdings in both indexes, whereas Nvidia, Alphabet, Broadcom, Meta Platforms, and Tesla -- among other names -- are solely in the growth index.

As a result, the Russell 1000 Value ETF's three largest holdings are Amazon, Apple, and Microsoft -- which make up a combined 17.4% of the ETF as of Sept. 30. Normally, Apple and Microsoft would have higher weightings than Amazon because they have higher market caps. But since all of Amazon's market cap is weighted exclusively by the value index while Apple and Microsoft are split, Amazon is actually the largest individual holding in the Russell 1000 Value ETF.

Other top holdings in the ETF are more traditional value stocks like Berkshire Hathaway, JPMorgan Chase, ExxonMobil, Johnson & Johnson, Intel, AbbVie, and Cisco Systems -- although I wouldn't be surprised if Intel and Cisco join the growth index during the next rebalancing.

The Vanguard Russell 1000 Value ETF has a 21.6 price-to-earnings (P/E) ratio and 1.5% dividend yield, making it less expensive and more income-focused than the Vanguard S&P 500 ETF -- which has a 24 P/E and 1.1% yield. The Vanguard Russell 1000 Value ETF has a dirt cheap fee structure -- charging a mere 0.06% expense ratio, or $6 for every $10,000 invested. The ETF has crushed the S&P 500 year to date, driven by strong performance in key value-focused sectors such as energy, consumer staples, and healthcare, and the ETF's lower exposure to the semiconductor industry relative to the S&P 500.

The Vanguard Russell 1000 Value ETF is a top buy now

The Vanguard Russell 1000 Value ETF is a great buy for investors who view Amazon as an established cloud computing and retail giant, Apple as a modern-day consumer staple, and Microsoft as a balanced technology conglomerate with a clear runway for moderate earnings appreciation and a growing dividend. Even with these names, the ETF is more value-focused than the S&P 500. The ETF's 19.5% weighting in the technology sector makes it a nice middle ground between a more growth-focused index like the S&P 500 and traditional value ETFs that will exclude giant tech stocks like Apple and Microsoft.

All told, the Vanguard Russell 1000 Value ETF is the ideal fit for investors who want to buy an ETF with leading growth stocks but who are also satisfied with their existing Nvidia holdings or want to avoid the stock altogether.

JPMorgan Chase is an advertising partner of Motley Fool Money. Daniel Foelber has positions in Broadcom and Nvidia. The Motley Fool has positions in and recommends AbbVie, Amazon, Apple, Berkshire Hathaway, Broadcom, Cisco Systems, Intel, JPMorgan Chase, Meta Platforms, Microsoft, Nvidia, Tesla, Vanguard Morningstar Growth ETF, and Vanguard S&P 500 ETF. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.