*Disclaimer: This article is for informational purposes only, nothing should be taken as professional investment advice.
ETFs (Exchange-traded funds) are often known as the “Swiss Army knife” of investing. This is because you can use them to do many things, like establish a portfolio core, up your defensive tactics, benefit when the market falls, go for the moon-shot, and much more.
- Invesco S&P 500 GARP ETF (SPGP)
- Invesco QQQ Trust (QQQ)
- Vanguard Mega Cap Growth ETF (MGK)
- iShares Russell 1000 Growth ETF (IWF)
- SPDR Portfolio S&P 500 Growth ETF (SPYG)
- Final thoughts
If the past two and a half years have taught us anything, it is that we must be ready for anything. Among the best stocks for 2022, much like the years previous, include optimistic funds geared to take advantage of the numerous trends that Wall Street’s analysts and strategists predict will play out in the year ahead.
Growth ETFs are one of two categories of ETFs available, the other being value ETFs. They provide investors with a simple and low-cost way to gain exposure to the world of fast-rising companies. A large-cap growth ETF invests in hundreds of the strongest publicly traded companies with optimistic sales and earnings growth.
According to Investopedia, growth stocks all have a few characteristics in common. Growth companies, for example, are more likely to have innovative product lines. They might have patents or access to technologies that let them outperform the competition in their field. They reinvest revenue to develop even newer technologies and patents in order to stay ahead of competitors and secure long-term success.
Over the last few years, growth investing has outperformed value investing. That said, past results do not guarantee future outcomes, so keep this in mind when investing. Fast growth is sometimes accompanied by more volatility, especially during periods of economic instability, thus these ETFs can produce above-average returns, but they also entail more risk.
For investors hoping for a steady stream of income, these ETFs may not be the ideal option. Because many growth companies reinvest their profits in future expansion rather than distributing dividends to shareholders, this is the case.
Nevertheless, growth companies remain an important part of a well-diversified portfolio. According to a recent Forbes analysis, these are some of the top large-cap growth ETFs on the market today. The Forbes list focuses on index ETFs, specifically large-cap US ETFs, which were selected based on the index each fund tracks, the amount of holdings it has, its previous year’s returns, and the cost of each fund.
Invesco S&P 500 GARP ETF (SPGP)
The Invesco S&P 500 GARP ETF follows the S&P 500 Growth at a Reasonable Price Index, which is made up of roughly 75 stocks that have been identified as having the highest “growth scores” and “quality and value composite scores”.
SPGP has approximately $700 million in assets (AUM). At 36 basis points, it has a high expense ratio for index ETFs (0.36%).
Invesco QQQ Trust (QQQ)
QQQ follows The Nasdaq 100 Index, which covers 100 of the largest corporations in the United States and around the world. The fund’s significant position in the technology sector (48%) makes it a large-cap growth fund, despite the fact that it is not particularly structured to follow growth.
This popular fund has $206.7 billion in assets under management and has an expense ratio of 0.20%.
Vanguard Mega Cap Growth ETF (MGK)
The Vanguard Mega Cap Growth ETF aims to replicate the CRSP US Mega Cap Growth Index’s performance. This index categorizes growth based on a variety of characteristics, including long- and short-term profits per share (EPS) growth, sales per share growth, and return on assets growth (ROA). It has a P/E ratio of around 32, which is standard for the growth sector.
The fund has 13.8 billion dollars in AUM and an expense ratio of just 7 basis points (0.07%).
iShares Russell 1000 Growth ETF (IWF)
The iShares Russell 1000 Growth ETF aims to track large- and mid-cap growth companies in the United States. Despite the fact that the fund invests in mid-cap companies, it is classified as a large-cap stock.
The portfolio is significantly weighted to just a few companies, as is the case with most of the funds on the list. Nearly 27% of the portfolio is made up of the top three equities (Apple, Microsoft, and Amazon). IWF has $76 billion in AUM with a 0.19% percent expense ratio.
SPDR Portfolio S&P 500 Growth ETF (SPYG)
SPYG aims to replicate the S&P 500 Pure Growth Index’s performance. To determine both value and growth, the index considers a number of parameters. It then divides companies into groups depending on the ratio of their growth and value scores.
Only companies considered as deep growth are included in the index. As a result, the fund now has 74 holdings and a lower concentration at the top. With only $3.6 billion under management, RPG is one of the smallest funds on our list, and has an expense ratio of 0.35%.
Final thoughts
Growth stocks can be risky to invest in. Ultimately, there is always a trade-off between risk and return when it comes to investing. Growth stocks have a higher potential for future returns, but they also carry a higher risk than other assets such as value stocks. The major risk is that the current or anticipated growth does not persist in the long term. Investors pay a hefty premium for something they might not obtain, and often, a growth stock’s price can plummet in such circumstances.
Furthermore, because they rarely pay dividends, the only way for an investor to profit from their investment is to sell it later. When it comes time to sell the shares, investors face a loss if the company doesn’t quite perform successfully.
If you’re looking for more of a long-term investment, it might be worth looking into Value stocks. Value has tended to outperform growth stocks over the longer term, even though growth has been outperforming for the last few years.
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