Growth Exchange-Traded Funds (ETFs) are investment tools engineered to expose investors to high-growth companies, dynamic sectors, and innovative industries.
These funds are designed to mirror the performance of companies displaying substantial growth potential, making them an attractive option for individuals looking to capitalize on upward trends and higher performance.
In this article, we’ll cover the best growth ETFs in 2024 for those seeking exposure to dynamic and flourishing sectors within the market.
What is a Growth ETF?
Before we list the best Growth ETFs, let’s first define what Growth Stock ETF is.
Growth Exchange-Traded Fund (ETF) is an investment fund that provides investors exposure to companies that are expected or have the potential to experience above-average growth in revenue, earnings, returns, or other key financial metrics.
Growth ETFs can target specific industries with the potential for high growth, such as technology or healthcare, or they can target companies across various industries that are expected to grow or have shown signs of consistent growth.
Growth ETFs are best for investors willing to take on a higher level of risk in pursuit of potentially higher returns. Since stocks or companies labeled as growth are generally less stable than other companies, there is a higher risk that the companies will miss their targeted performance goals.
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What’s the difference between growth ETFs and growth stocks?
Growth stocks are the publicly traded shares of individual companies with growth characteristics. On the other hand, a growth ETF is an investment vehicle that holds a basket of many different growth stocks.
Like growth stocks, shares of growth ETFs trade on exchanges throughout the day and can be purchased at most brokerages. By purchasing a share of a growth ETF, investors receive proportional exposure to its underlying stocks.
Types of Growth ETFs
One key difference between growth ETFs is their target market size. Growth ETF’s target is based on the ranges of market capitalization.
Large-Cap
Large-capitalization growth ETFs are those that target the largest companies with growth potential. These ETFs have less risk and are more sustainable than other growth companies due to their size.
While the exact range can vary depending on the specific market capitalization, a common range is companies larger than $10 Billion.
Mid-Cap
A Mid-Cap Growth Fund is a type of mutual fund or exchange-traded fund (ETF) that specifically invests in the stocks of mid-sized companies with perceived high growth potential. The ETFs invest in stocks with a market cap between $2 billion and $10 billion. At the same time, the exact range of market capitalization can vary depending on the ETF.
Mid-cap growth ETFs offer a unique combination of sustainability and financial viability while offering significant growth potential. While not as risky as a small-cap growth ETF, they can offer higher returns than the large-cap growth ETF.
Small-Cap
A small-cap growth ETF is a fund that invests in companies with a market cap of $300 million to $2 billion.
Compared to other growth stocks, small-cap stocks offer the largest potential returns. Since these companies are still small, they are more risky than other growth ETFs but have a significantly higher growth potential than mid-cap and large-cap growth ETFs.
VUG
| VUG | |
|---|---|
| Diversification | RSP US Large Cap Growth Index. |
| Expense Ratio | 0.04% |
| SEC Yield | 0.52% |
| 1-Year | 41.46% |
| 5-Year | 18.33% |
| 10-Year | 14.08% |
| Dividend Yield | 0.59% |
| Dividend Growth Rate 5Y (CAGR) | 0.32% |
VUG is the Vanguard Growth ETF that tracks the performance of the CRSP US Large Cap Growth Index.
The index aims to generate returns similar to those of the major large capitalization growth stocks listed on the US stock market. Growth stocks are determined by selecting companies with higher price-to-book ratios and higher forecasted growth.
VUG is a passively managed fund that follows a full-replication strategy. This means that it aims to replicate the Index fund directly without any active management.
QQQ
| QQQ | |
|---|---|
| Diversification | Nasdaq 100 index |
| Expense Ratio | 0.20% |
| 1-Year | 48.50% |
| 5-Year | 9.89% |
| 10-Year | 17.75% |
| Dividend Yield | 0.57% |
| Dividend Growth Rate 5Y (CAGR) | 10.55% |
QQQ ETF or QQQ is an exchange-traded fund offered by Invesco. It’s managed to match the Nasdaq 100 index, rebalancing quarterly and reconstituting annually.
The Nasdaq 100 is an index that tracks the top 100 stocks on the Nasdaq stock exchange, excluding any companies in the financial sector.
Vanguard Small-Cap Value ETF (VBR)
| VBR | |
|---|---|
| Diversification | CRSP US Small Cap Value Index |
| Expense Ratio | 0.07% |
| SEC Yield | 2.11% |
| 1-Year | 8.38% |
| 5-Year | 9.93% |
| 10-Year | 8.24% |
| Dividend Yield | 2.15% |
| Dividend Growth Rate 5Y (CAGR) | 7.30% |
The Vanguard Small-cap Value ETF or VBR is a small-cap growth ETF offered by Vanguard. VBR aims to track the performance of the CRSP US Small Cap Value Index.
This index uses the CRSP US Small-Cap Index as a baseline. Using the companies that fall into the small-cap index, which fall into the bottom 2%-15% of market capitalization. From those companies, the CRSP US small-cap value index includes companies classified as value securities.
VBR is a passively managed exchange-traded fund with a full replication approach.
Invesco S&P MidCap 400 Pure Growth ETF (RFG)
| RFG | |
|---|---|
| Diversification | S&P Midcap 400 |
| Expense Ratio | 0.35% |
| SEC Yield | 0.39% |
| 1-Year | 12.10% |
| 5-Year | 8.47% |
| 10-Year | 5.87% |
| Dividend Yield | 0.99% |
| Dividend Growth Rate 5Y (CAGR) | 15.30% |
The Invesco S&P MidCap 400 Pure Growth ETF or RFG is an exchange-traded fund offered by Invesco.
The RFG ETF tracks the performance of the S&P Midcap 400 Index, which is a measure of the midcap market as a whole. The Midcap 400 follows 400 midcap companies that meet the index criteria, which include several metrics. The key metric is an adjusted market capitalization of $5.8 Billion to $15.8 Billion. The index also ensures companies are disbursed among several sectors and for financial viability.
iShares Morningstar Mid-Cap Growth ETF (IMCG)
| IMCG | |
|---|---|
| Diversification | Morningstar Mid-Cap Growth ETF |
| Expense Ratio | 0.06% |
| SEC Yield | 0.89% |
| 1-Year | 13.83% |
| 5-Year | 13.81% |
| 10-Year | 10.81% |
| Dividend Yield | 0.86% |
| Dividend Growth Rate 5Y (CAGR) | 36.66% |
iShares Morningstar Mid-Cap Growth ETF or IMCG is an exchange-traded fund that aims to track mid-cap growth companies’ performance. The fund tracks the performance of the Morningstar Mid-Cap Growth ETF.
The index provides a comprehensive, consistent representation of the mid-cap growth US equity market. The Index uses a 10-factor model followed by other Morningstar indexes that provide a holistic view of the mid-cap growth US market.
Schwab U.S. Small-Cap ETF (SCHA)
| SCHA | |
|---|---|
| Diversification | Dow Jones U.S. Small-Cap Total Stock Market Index |
| Expense Ratio | 0.04% |
| SEC Yield | 1.48% |
| 1-Year | 9.26% |
| 5-Year | 8.57% |
| 10-Year | 7.17% |
| Dividend Yield | 1.48% |
| Dividend Growth Rate 5Y (CAGR) | 6.96% |
Schwab U.S small-cap ETF or SCHA is an exchange-traded fund managed by Charles Schwab Asset Management. The fund aims to track the performance of the Dow Jones U.S Small-Cap total stock market index.
The Dow Jones U.S Small-Cap total stock market index includes companies that are ranked 3,000. The fund allows for easy access to the U.S. small-cap equities and may also provide long-term growth for your portfolio.
iShares Russell 1000 Growth ETF (IWF)
| IWF | |
|---|---|
| Diversification | Russell 1000 Growth Index |
| Expense Ratio | 0.19% |
| SEC Yield | 0.60% |
| 1-Year | 38.87% |
| 5-Year | 18.53% |
| 10-Year | 14.76% |
| Dividend Yield | 0.61% |
| Dividend Growth Rate 5Y (CAGR) | 2.34% |
The iShares Russell 1000 Growth ETF or IWF is an exchange-traded intended to
The Russell 1000 includes 1000 companies with relatively higher price-to-book ratios, higher forecast medium-term (2 years) growth, and higher sales per share historical growth (5 years). The Russel 1000 is intended to provide a performance tracker for the large-cap and medium-cap market of the United States.
Final Thoughts
There you have it, the best growth ETFs for 2024. Whether you are looking for modest growth with large caps or if you are looking to maximize your returns for some additional risk with a small-cap growth ETF, we’ve got you covered. Don’t miss out on the opportunity to generate higher returns with a Growth ETF, and use the information we provided to help you decide which ETF is best for you.
Frequently Asked Questions
What’s the difference between growth and value stocks?
Growth and value stocks represent two primary investment strategies with distinct characteristics and focus. While growth investing is forward-looking, focusing on future potential, value investing seeks bargains based on current fundamentals.
Growth stocks belong to companies expected to grow their earnings at an above-average rate compared to other stocks in the market. These companies are often in an expansion phase, and investors are usually willing to pay a premium for them, anticipating future profits. They might only sometimes pay dividends as they typically reinvest their profits into growing the business.
On the other hand, value stocks are shares of companies that are considered undervalued compared to their intrinsic value. Value investors believe the market has overlooked these companies, which may be stable and mature and often offer dividends. The idea is that value stocks provide a margin of safety and will eventually be recognized by the market, leading to potential gains.
Are growth ETFs high-risk?
Investing in equities is considered higher risk than assets like bonds or cash.
Growth stocks tend to be the riskiest in terms of their historical volatility within the equity universe. If you hold growth ETFs, you must be able to cope with potentially high fluctuations and sharp losses during unfavorable economic conditions. Many growth ETFs tend to overweight certain sectors like technology, which adds a higher degree of sector concentration risk.
