When it comes to the best growth ETFs, you’re looking at a treasure trove of companies on the fast track to success.
These ETFs are like baskets filled with stocks that are not just doing well but are practically sprinting ahead. They’re the ones with soaring sales, overflowing cash, and share prices that are on fire.
Let’s take a quick trip down memory lane: Back in the days after the 2008 financial crisis, and right up until the start of the COVID-19 pandemic, growth stocks were the rock stars, outshining the more laid-back value stocks.
But 2020 and 2022 threw us a curveball, with value stocks stealing the limelight. Now, fast forward to today, and growth stocks are back in the spotlight, taking center stage once more.
If you’re nodding your head, thinking that growth stocks are where the action is, then it’s time to consider adding a growth ETF to your investment mix. And to make your search a whole lot easier, we’ve done the heavy lifting for you.
We’ve cherry-picked the best growth ETFs out there, the ones that are dishing out above-average returns, come with wallet-friendly expense ratios, and have earned gold stars from the experts over at Morningstar.
|Growth ETFs||Expense Ratio||Dividend Yield||10-Year Avg. Ann. Return|
|Vanguard Russell 1000 Growth ETF (VONG)||0.08%||0.78%||13.46%|
|Nuveen ESG Large-Cap Growth ETF (NULG)||0.26%||0.33%||16.03%|
|iShares Morningstar Mid-Cap Growth ETF (IMCG)||0.06%||0.94%||9.54%|
|Vanguard Mid-Cap Growth ETF (VOT)||0.07%||0.73%||8.42%|
|Vanguard S&P Small-Cap 600 Growth ETF (VIOG)||0.15%||1.32%||7.23%|
|iShares Morningstar Small-Cap Growth ETF (ISCG)||0.06%||0.95%||5.95%|
|First Trust Nasdaq 100 Equal Weighted ETF (QQEW)||0.58%||0.65%||11.73%|
|iShares S&P 500 Growth ETF (IVW)||0.18%||1.02%||12.32%|
|WisdomTree International Hedged Quality Dividend Growth Fund (IHDG)||0.58%||1.81%||8.44%|
|iShares MSCI EAFE Growth ETF (EFG)||0.36%||1.27%||3.39%|
What you'll learn:
➤ Best Growth ETFs
1️⃣ Vanguard Russell 1000 Growth ETF (VONG)
- Expense Ratio: 0.08%
- Dividend Yield: 0.78%
- 10-Year Avg. Ann. Return: 13.46%
If hindsight gave you 20-20 investment vision, you would have bought and held the Vanguard Russell 1000 Growth ETF a decade ago.
Since then, the fund has notched a fine average annual return of about 14%—versus about 12% for the S&P 500. Unfortunately, past returns don’t guarantee future performance.
VONG owns roughly 500 of the largest, growthiest U.S. companies. With an overall price-to-earnings ratio above 30, you’re paying more than $30 for each dollar of earnings for a share of VONG.
With about 45% of the fund invested in the technology sector, VONG is not for the faint-of-heart. The fund has slammed its category peers during every prior period, likely due in part to its rock-bottom expense ratio.
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2️⃣ Nuveen ESG Large-Cap Growth ETF (NULG)
- Expense Ratio: 0.26%
- Dividend Yield: 0.33%
- Avg. Ann. Return Since Inception (December 2016): 16.03%
The Nuveen ESG Large-Cap Growth ETF owns large-cap growth companies that meet environmental, social and governance investing criteria. In contrast with its peers, NULG includes a greater allocation of mid-cap stocks and falls a bit lower than average on the quality spectrum.
This sustainable fund is roughly 40% invested in technology stocks. It has approximately another 15% in consumer cyclicals, and roughly 10% in the healthcare sector. Morningstar assigns NULG a silver medal and expects the fund to outperform its benchmark index.
3️⃣ iShares Morningstar Mid-Cap Growth ETF (IMCG)
- Expense Ratio: 0.06%
- Dividend Yield: 0.94%
- 10-Year Avg. Ann. Return: 9.54%
The iShares Morningstar Mid-Cap Growth ETF is a plain vanilla, passively managed mid-cap growth fund. It provides affordable access to about 325 mid-sized U.S. companies with above-average earnings growth.
IMCG devotes roughly 25% and 20% to the information technology and industrials sectors, respectively. Healthcare stocks and consumer cyclicals round out IMCG’s next largest sectors.
With only 10% of shareholder money in the fund’s top-10 holdings, IMCG is nicely diversified. The low expense ratio helped the fund surpass the average annual returns of its Morningstar category over the past one, three, five, 10 and 15 years.
IMCG’s holdings fall a bit lower in the quality category than the category average and a bit higher in momentum than its peers. Anyone seeking mid-cap growth exposure should consider IMCG.
4️⃣ Vanguard Mid-Cap Growth ETF (VOT)
- Expense Ratio: 0.07%
- Dividend Yield: 0.73%
- 10-Year Avg. Ann. Return: 8.42%
The Vanguard Mid-Cap Growth ETF owns roughly 150 stocks. Its average annual earnings growth rate has topped its Morningstar category’s pace by several percentage points in recent years.
This alternative to the iShares Morningstar Mid-Cap Growth ETF has a larger allocation to its top-10 holdings than IMCG.
It tilts towards lower-quality companies with less momentum than the category average. This does not deter the Morningstar analysts from assigning the fund a gold designation.
VOT sports a P/E ratio of roughly 25—you’ll spend about $25 to buy one dollar of VOT earnings. The fund also falls lower than its peers in the momentum category. It’s tech-heavy, with an allocation around 30%.
Healthcare and industrial stocks come in next. Mid-cap growth investors, seeking to limit exposure to growth stocks, should like VOT.
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5️⃣ Vanguard S&P Small-Cap 600 Growth ETF (VIOG)
- Expense Ratio: 0.15%
- Dividend Yield: 1.32%
- 10-Year Avg. Ann. Return: 7.23%
The Vanguard S&P Small-Cap 600 Growth ETF tracks small-cap growth companies in the S&P 600 Index. VIOG has an average annual five-year earnings growth rate just a tad lower than the widely followed big-cap S&P 500 Index.
And its P/E ratio is around 15. That is lower than the big-cap S&P 500’s P/E around 20.
VIOG’s combination of decent growth and low P/E ratios look like a likely recipe for future share-price appreciation, as the valuation catches up with the growth rate.
VIOG’s favorite sectors are technology, industrials and financial services. With only about 12% of fund assets in the top 10 holdings, you’re getting broad diversification.
6️⃣ iShares Morningstar Small-Cap Growth ETF (ISCG)
- Expense Ratio: 0.06%
- Dividend Yield: 0.95%
- 10-Year Avg. Ann. Return: 5.95%
Large-cap stocks have continued to outperform their small-cap brethren. Owning the iShares Morningstar Small-Cap Growth ETF would give you exposure to the small-cap U.S. growth space in the event that small caps finally break out.
In the meantime, the fund gives your portfolio prudent diversification.
ISCG would diversify your portfolio at low cost, with its 0.06% expense ratio. With more than 1,000 holdings, owners receive a diverse stock basket that generates nearly a 1% dividend yield.
The fund is further diversified by virtue of its top-10 accounting for well under 10% of the entire portfolio.
In contrast to category peers, ISCG tends to invest in lower-quality firms with greater volatility. Health care, tech, industrials, and consumer discretionary stocks make up ISCG’s four largest sectors.
7️⃣ First Trust Nasdaq 100 Equal Weighted ETF (QQEW)
- Expense Ratio: 0.58%
- Dividend Yield: 0.65%
- 10-Year Avg. Ann. Return: 11.73%
The First Trust Nasdaq-100 Equal Weighted ETF begins with the 100 most prominent companies on the Nasdaq stock exchange, excluding financial firms, then holds them in equal one-percent proportions.
The fund’s equal-weight strategy is in contrast with market-cap-weighted funds, which own companies in proportion to their size.
The equal-weight strategy ensures that no single company dominates the fund. It also adds a slight nudge toward the value stock end of the spectrum in a portfolio that otherwise tilts toward large, fast-growing companies.
QQEW’s portfolio owns a higher concentration of utility, technology, industrial, and consumer staples companies than its category peers. It is underweight in the financial services and healthcare sector.
The Morningstar gold-ranked fund with category-beating performance during the one- through 15-year periods says QQEW has done a good job for investors.
Yet, investors need to be mindful that the investment markets during these periods have favored those types of growth stocks.
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8️⃣ iShares S&P 500 Growth ETF (IVW)
- Expense Ratio: 0.18%
- Distribution Yield: 1.02%
- 10-Year Avg. Annual Return: 12.32%
For growth investors who want to own the most prominent U.S. companies, the iShares S&P 500 Growth ETF fits the bill.
The fund holds well over 200 of the fastest-growing members of the S&P 500 index, which makes this market-cap-weighted fund a bit top-heavy. Its top-10 holdings account for roughly 45% of IVW’s total assets.
IVW offers a lower P/E ratio than its Morningstar category average, giving it a more attractive valuation.
On the other hand, its historical earnings growth rate tops its category’s average. So does its sales growth rate. These metrics make IVW a relatively inexpensive fund with superior earnings and sales growth.
Potential drawbacks? Hefty weightings in technology and healthcare are part of the reason IVW has been volatile in recent years.
9️⃣ WisdomTree International Hedged Quality Dividend Growth Fund (IHDG)
- Expense Ratio: 0.58%
- Dividend Yield: 1.81%
- Avg. Ann. Return Since Inception (May 2014): 8.44%
Investors who want to own high-quality, fast-growing international stocks outside of the U.S. and Canada need look no further than WisdomTree International Hedged Quality Dividend Growth Fund.
This ETF aims to give investors exposure to dividend-paying companies with growth characteristics in the developed world, excluding the U.S. and Canada.
At the same time, IHDG seeks to hedge exposure to fluctuations between the U.S. dollar and foreign currencies. That’s because global exchange rates can be volatile.
The fund devotes more than 80% of its holdings to large-cap foreign firms. Roughly 15% of its portfolio is mid-caps. The rest is in the smallest firms.
Roughly half of IHDG’s portfolio comprises stocks from Switzerland, the United Kingdom, and France. Japanese companies make up about 8%. The remainder are various other global stocks.
IHDG’s Morningstar Bronze rating indicates the research firm expects IHDG to outperform its peer group or benchmark over a full market cycle.
🔟 iShares MSCI EAFE Growth ETF (EFG)
- Expense Ratio: 0.36%
- Dividend Yield: 1.27%
- 10-Year Avg. Ann. Return: 3.39%
The iShares MSCI EAFE Growth ETF provides diversified exposure to fast-growing companies in Europe, Australia, Asia, and the Far East.
International investment markets have not kept up with the U.S. during the last decade or so, making them a better value today. In addition, Fidelity Investments predicts that global markets will beat the U.S. over the next two decades.
By far, the bulk of EFG’s money is at work in developed markets. The fund overweights industrials and healthcare. EFG underweights financials and energy.
In the past 12 months, EFG’s total return has soared to more than double its annual pace over the past 10 years. In comparison, the broad U.S. stock market in the form of the S&P 500 has gained only about 90% of its rate of return over the past decade.
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➤ What’s Growth Investing?
Growth investing is like picking winners from a bunch of racing horses. It’s about buying stocks from companies that are making more money and growing faster than their competitors. These companies are all about expanding and getting even bigger.
But here’s the catch – it’s a bit like riding a rollercoaster. They can go up really fast, but they can also drop down in a jiffy. So, it’s kind of a thrill ride for folks who don’t mind a bit of risk.
➤ How Do Growth ETFs Work?
Alright, picture this: Growth ETFs are like a menu in a restaurant. They’ve got a list of dishes, which are the different companies in the stock market.
Now, these ETFs follow a plan to pick the tastiest dishes, the ones with the most potential to grow. They’re like chefs who choose the juiciest ingredients. Some ETFs go all-in on a few top dishes, while others spread the love to lots of dishes.
➤ What to Look for in a Growth ETF?
When you’re shopping for Growth ETFs, there are some things you want to keep in mind. First up, you don’t want to pay too much to eat at that restaurant, right? So, check out the price tag, called the expense ratio.
The lower, the better. Now, remember when you’re trying to decide if a dish is yummy? You look at the chef’s special – that’s the track record.
So, check how the ETF has done in the past, especially over the last five or ten years. And while you’re at it, see if they have a good mix of dishes from different categories. It’s like choosing a buffet with all your favorite foods.
➤ Value ETFs vs Growth ETFs
Think of it like this: Growth ETFs are like betting on the fastest horses, the ones that are expected to zoom ahead and bring home a big prize. They’re like thoroughbreds, always reinvesting their winnings to get even faster.
On the other hand, Value ETFs are like a more relaxed ride – they’re into well-established horses that may not zoom ahead as fast, but they give you a smooth, steady journey and even throw you some cash along the way.
Now, it’s decision time. If you’re up for a wild ride, and you believe in those speedy horses, then go for Growth ETFs. But remember, they can be a bit unpredictable, so it’s not for the faint of heart. If you prefer a more chill, scenic route with fewer surprises, Value ETFs might be your thing.
The choice depends on how brave you’re feeling and what kind of adventure you’re up for. Just like choosing between a rollercoaster or a gentle Ferris wheel.
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➤ How to Buy Growth ETFs
Ready to take the plunge? Here’s your step-by-step guide. Think of it like ordering your favorite food online:
Open a Brokerage Account: It’s like getting a ticket to the amusement park. You choose your account based on what kind of adventure you’re planning. Retirement, savings, or just for fun?
Research Growth ETFs: Now, check out the menu of Growth ETFs to find the ones that suit your taste. Some are simple, like following a recipe, while others are more like gourmet chefs, making changes all the time.
Buy Growth ETFs: Time to place your order. Transfer some cash to your account, like having money to spend at the park. Find your chosen ETF, just like finding your favorite dish. Type in how many shares you want to buy, and hit the order button.
Set Up a Purchase Plan: Adventures don’t stop at one ride. Consider setting up a regular plan to keep adding more shares to your collection. It’s like planning your next adventures at the park so you can have even more fun.
➤ Best Growth ETFs FAQ
Growth ETFs or Growth Stocks?
Okay, so here’s the deal. Growth stocks are like individual superheroes – they’re companies that are making lots of money, way more than regular companies.
But there’s a catch. If you put all your money in just one superhero, and they have a bad day, you’re in trouble.
That’s where Growth ETFs come to the rescue. They’re like a team of superheroes – a bunch of different companies that are growing fast. So, if one has a bad day, the others can save the day.
Why Invest in Growth ETFs?
Now, the big question. Do you want to join the adventure of high-growth stocks? They’re like roller coasters, lots of ups and downs. If you’re cool with the ride and want a chance to make more money, then hop on!
But if you don’t like roller coasters or feeling queasy when your money goes up and down too much, then maybe stick with something steadier, like Value ETFs.
What are Dividend Growth ETFs?
Okay, let’s switch gears. Imagine you have a money tree, and it keeps growing more money for you every year. That’s what dividend growth stocks do.
They’re companies that pay you some cash (dividends) and keep increasing how much they pay you year after year. It’s like getting a raise every year, just for having those stocks.
Growth ETFs and Bear Markets?
Bear markets are like rainy days for your investments. Growth ETFs can be a bit like race cars – they’re fast, but if the road gets slippery, they might skid.
When bad stuff happens in the stock market that slows down companies’ money-making, it can be tough for growth stocks. They tend to not do so well during these rainy days.
How Many ETFs to Own?
Alright, how many different candies should you have in your candy jar? Well, it’s kind of like that with ETFs. Some experts say that having 5 to 10 different ETFs in your collection is a sweet spot for a good mix.
But it really depends on how big your candy jar (portfolio) is and what you want to do with it. Just remember to keep an eye on your candies and make sure they’re doing what you want them to do.
➤ Final Thoughts
Investing in the best Growth ETFs can be a rewarding strategy for those seeking to capitalize on the potential of high-growth companies.
The ETFs we’ve highlighted offer a range of options, from large-cap to small-cap and international exposure, each with its unique strengths and considerations.
As with any investment, it’s crucial to align your choice with your financial goals and risk tolerance. Diversification and low expenses remain key factors in building a robust portfolio.
Remember, while past performance provides valuable insights, it doesn’t guarantee future results. Stay informed, stay diversified, and consider consulting with a financial advisor to make the most of your investment journey.
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