Investing in growth ETFs offers a strategic way to capitalize on high-growth assets while diversifying risk. Growth ETFs bundle together numerous high-performing stocks, making it easier for investors to achieve significant long-term returns.
Here are the top five growth ETFs to consider for your portfolio in 2024, based on performance metrics, diversification, and expense ratios.
1. Schwab U.S. Large-Cap Growth ETF (SCHG)
The Schwab U.S. Large-Cap Growth ETF (SCHG) is a top-performing growth ETF with a 10-year average annual return of 15.41%. Designed to match the large-cap growth index, SCHG offers investors exposure to over 250 of the largest and fastest-growing companies in the U.S. market. It boasts an exceptionally low expense ratio of 0.04%, making it a cost-effective choice for investors. The ETF’s dividend yield stands at 0.45%, adding to its appeal.
A significant portion of SCHG’s holdings, approximately 55%, is concentrated in its top 10 stocks, including major technology firms like Apple and Microsoft. This concentration means the fund’s performance is heavily influenced by these leading companies. SCHG provides tax-efficient performance, making it an attractive option for investors seeking substantial long-term growth. However, potential investors should be mindful of the higher risk associated with its concentrated portfolio.
2. SPDR S&P 500 ESG ETF (EFIV)
The SPDR S&P 500 ESG ETF (EFIV) is a prominent choice for socially responsible investors, boasting an average annual return of 16.78% since its inception in July 2020. This ETF focuses on companies within the S&P 500 that adhere to strict environmental, social, and governance (ESG) criteria, excluding industries such as weaponry, tobacco, and thermal coal. EFIV offers a competitive expense ratio of 0.10% and a dividend yield of 1.29%.
The fund holds 316 companies, with a notable 32% allocation to the technology sector. Major holdings include industry giants like Apple, Microsoft, Amazon, Nvidia, and Alphabet, which collectively make up 30% of the fund. This strong focus on leading tech firms has driven EFIV’s impressive performance. While the ETF provides a robust option for combining growth with sustainability, investors should be aware of the concentration risk in these top companies and the potential volatility it entails.
3. Vanguard Russell 1000 Growth ETF (VONG)
The Vanguard Russell 1000 Growth ETF (VONG) offers broad exposure to high-growth U.S. companies, boasting a 10-year average annual return of 15.33%. This ETF tracks the Russell 1000 Growth Index, encompassing 444 large-cap stocks that represent approximately 93% of the U.S. equity market’s total capitalization. With an expense ratio of just 0.08% and a dividend yield of 0.70%, VONG is an attractive, cost-effective option for growth-focused investors.
The fund’s portfolio is heavily weighted towards the technology sector, with the top 10 holdings—including industry leaders like Apple, Microsoft, Amazon, Nvidia, and Alphabet—comprising 52% of its assets. This market capitalization-weighted approach means VONG’s performance is significantly influenced by these major tech companies. While this concentration can drive substantial returns during tech sector booms, investors should consider the potential risks associated with such a focused investment in their portfolio.
4. Fidelity Enhanced Large Cap Growth ETF (FELG)
The Fidelity Enhanced Large Cap Growth ETF (FELG) stands out as an actively managed growth ETF with a robust 10-year average annual return of 14.55%. It seeks capital appreciation by selecting stocks within the Russell 1000 Growth Index based on factors like valuation, growth, and profitability. With an expense ratio of 0.18% and a modest dividend yield of 0.19%, FELG provides strong performance at a reasonable cost.
FELG’s portfolio includes a mix of large-cap, mid-cap, and small-cap companies, with a notable 45% allocation to the technology sector. The fund’s top 10 holdings, which account for 53% of its assets, reflect a high conviction in these stocks. This focused approach can lead to significant outperformance, but it also introduces higher risk compared to more diversified funds. Investors seeking a blend of active management and growth potential will find FELG an appealing addition to their portfolios.
5. Direxion NASDAQ-100 Equal Weighted ETF (QQQE)
The Direxion NASDAQ-100 Equal Weighted ETF (QQQE) offers a unique approach to investing in the top 100 non-financial companies listed on the Nasdaq by allocating equal weight to each stock. This strategy provides a more balanced exposure compared to traditional market capitalization-weighted growth ETFs. QQQE has a 10-year average annual return of 13.31% and features an expense ratio of 0.35% with a dividend yield of 0.91%.
By equally weighting its holdings, QQQE reduces the concentration risk associated with larger companies and emphasizes the performance of smaller firms within the index. This can lead to lower volatility and more stable returns. The top 10 holdings make up only 10% of the fund, offering a diversified investment across the Nasdaq-100. This approach allows investors to benefit from the growth of the technology sector while mitigating the impact of any single stock’s performance on the overall fund.