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Vanguard Mega Cap Index 300 ETF (NYSEARCA:MGC) can be used as a core holding in a diversified portfolio, or fill in as a large cap holding. Whatever an investor uses it for, the fund features low fees and stable performance, a key characteristic in today's uncertain market.

"MGC is an ideal core equity holding because of its low-cost, indexed-based approach. Its underlying stocks are widely diversified across both sectors and the value-growth spectrum. This fund is particularly well-suited for those seeking to precisely control their market-cap exposure," Michael Rawson, CFA, wrote in a recent Morningstar article.

Earnings in U.S. companies have held up despite the first quarter growth forecast projected lower to 1.9%, and the slower job growth recently reported. Also, slower growth in emerging economies and the European sovereign debt crisis continue to weigh on investor confidence.

However, analysts are expecting operating earnings on S&P 500 stocks to hit $105 in 2012, putting the S&P 500 at an attractive forward price/earnings ratio of 12.5 times. The 2.4% dividend yield on the stocks in this portfolio is higher than the 1.6% yield on the 10-Year U.S. Treasury Note, reports Rawson.

Furthermore, dividend yields are more attractive than intermediate term bond yields, which will give stocks a better valuation compared to bonds. The lower volatility that mega caps posses also make a case for investing in a fund such as MGC. MGC currently has about $393 million in AUM, with a yield of 1.89%.

MGC holds nearly 90% of the S&P 500 by market capitalization, and covers the entire large-cap class, with a few mid-caps thrown in. About 57% of the index is dedicated to large-caps. The 0.12% expense ratio is a bargain relative to the large-cap companies that are represented in the index.

Vanguard Mega Cap Index 300 ETF

(click to enlarge)

Tisha Guerrero contributed to this article.

Source: ETF Spotlight: Vanguard Mega Cap