Investors are always on the lookout for the next big thing in the stock market. Growth stocks have a reputation for delivering impressive returns, with some even doubling or tripling in value within a year. However, identifying these high-performing stocks can be time-consuming and challenging. What if there was an easier way to invest in potential winners? This is where growth exchange-traded funds (ETFs) come in, offering a convenient way to invest in a diversified portfolio of growth stocks with just one purchase.
If you’re considering investing in a growth ETF, here are some key factors to keep in mind:
What to look for in a growth ETF
Before choosing a growth ETF, it’s essential to consider the following:
- Long-term track record: Review the fund’s five- and ten-year track record to assess its performance over time. While past performance is not indicative of future results, it can provide valuable insights into the fund’s potential.
- Diversification: Look for ETFs that are well-diversified across different sectors to reduce risk and enhance the safety of your investment.
- Expense ratio: Consider the fund’s expense ratio, which represents the annual cost of owning the ETF. Lower expense ratios can lead to higher returns for investors.
- Fund holdings: Examine the fund’s top holdings to ensure they align with the fund’s investment objective. The holdings should reflect the fund’s focus on growth stocks.
Here are some top growth ETFs to consider for your investment portfolio:
Best growth ETFs
iShares Russell Top 200 Growth ETF (IWY)
The IWY ETF tracks an index of large-cap U.S. growth stocks, with a strong track record over five and ten years. It is heavily concentrated in high-quality tech stocks such as Apple, Amazon, and Microsoft.
- 5-year returns (annualized): 19.4 percent
- Expense ratio: 0.20 percent
- Dividend yield: 0.5 percent
Schwab U.S. Large-Cap Growth ETF (SCHG)
The SCHG ETF tracks the Dow Jones U.S. Large-Cap Growth Total Stock Market Index, focusing on information technology stocks like Apple. It has delivered strong returns with a low expense ratio.
- 5-year returns (annualized): 18.7 percent
- Expense ratio: 0.04 percent
- Dividend yield: 0.4 percent
Vanguard Mega Cap Growth ETF (MGK)
The MGK ETF aims to track the CRSP U.S. Mega Cap Growth Index, comprising the largest publicly traded U.S. stocks. It is heavily invested in information technology and consumer discretionary stocks.
- 5-year returns (annualized): 18.5 percent
- Expense ratio: 0.07 percent
- Dividend yield: 0.4 percent
Vanguard Russell 1000 Growth ETF (VONG)
The VONG ETF invests in stocks from the Russell 1000 Growth Index, focusing on large U.S. growth companies in sectors like information technology and healthcare.
- 5-year returns (annualized): 17.7 percent
- Expense ratio: 0.08 percent
- Dividend yield: 0.6 percent
iShares Russell 1000 Growth ETF (IWF)
The IWF ETF tracks an index of large- and mid-cap growth stocks, including major companies like Apple and Alphabet. It has delivered strong returns over time.
- 5-year returns (annualized): 17.6 percent
- Expense ratio: 0.19 percent
- Dividend yield: 0.6 percent
SPDR Portfolio S&P 500 Growth ETF (SPYG)
The SPYG ETF focuses on large-cap growth stocks in the S&P 500 Growth Index, including top performers like Apple, Amazon, and Microsoft.
- 5-year returns (annualized): 15.5 percent
- Expense ratio: 0.04 percent
- Dividend yield: 0.8 percent
Invesco S&P 500 GARP ETF (SPGP)
The SPGP ETF is based on the S&P 500 Growth at a Reasonable Price Index, focusing on stocks that score well on growth, quality, and value metrics.
- 5-year returns (annualized): 13.9 percent
- Expense ratio: 0.34 percent
- Dividend yield: 1.4 percent
Conclusion
Investing in growth ETFs can provide a convenient and efficient way to gain exposure to high-performing stocks without the need for extensive research. By choosing the right ETFs, investors can enjoy strong returns over time and minimize the complexities of stock picking. For a comprehensive list of top ETFs, be sure to explore Bankrate’s recommendations.
Editorial Disclaimer: It is advisable for all investors to conduct their own research before making investment decisions. Past performance does not guarantee future results in investment products.