Barbara FriedbergInvesting Expert Writer
Friedberg is a former investment portfolio manager, university finance instructor and author of three books including "Personal Finance; An Encyclopedia of Modern Money Management." Her work has been featured in national investment publications such as Forbes Advisor, Investopedia, U.S.News and World Report, Yahoo Finance, GoBankingRates and InvestorPlace. She is a regular panelist on the Money Tree Investing Podcast and owns BarbaraFriedbergPersonalFinance.com.
Barbara Friedberg
Barbara FriedbergInvesting Expert Writer
Friedberg is a former investment portfolio manager, university finance instructor and author of three books including "Personal Finance; An Encyclopedia of Modern Money Management." Her work has been featured in national investment publications such as Forbes Advisor, Investopedia, U.S.News and World Report, Yahoo Finance, GoBankingRates and InvestorPlace. She is a regular panelist on the Money Tree Investing Podcast and owns BarbaraFriedbergPersonalFinance.com.
Investing Expert Writer
Rae Hartley BeckDeputy Editor of Investing and Retirement
Rae Hartley Beck first started writing about personal finance in 2011 with a regular column in her college newspaper as a staff writer. Since then she has become a leader in the Financial Independence, Retire Early (FIRE) movement and has over 100 bylines in prominent publications including Money, Bankrate and Investopedia on all things personal finance. A former award-winning claims specialist with the Social Security Administration, Rae continues to share her expert insider knowledge with Forbes Advisor readers.
Reviewed
Rae Hartley Beck
Rae Hartley BeckDeputy Editor of Investing and Retirement
Rae Hartley Beck first started writing about personal finance in 2011 with a regular column in her college newspaper as a staff writer. Since then she has become a leader in the Financial Independence, Retire Early (FIRE) movement and has over 100 bylines in prominent publications including Money, Bankrate and Investopedia on all things personal finance. A former award-winning claims specialist with the Social Security Administration, Rae continues to share her expert insider knowledge with Forbes Advisor readers.
Deputy Editor of Investing and Retirement
Reviewed
Updated: Jun 6, 2024, 12:16am
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.
Growth ETFs can save you precious research time by bundling together many high-growth assets into one easy to buy ETF. Growth ETFs come with impressively high long term returns that make these an attractive set-it-and-forget-it option.
It’s difficult to predict regime shifts between growth and value investment styles. While growth has dominated over the last 15 years or so, value has dominated since 1927. Keep history in mind when choosing the best growth stock ETFs for your portfolio and remember to maintain a diversified investment portfolio.
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Best Growth ETFs of June 2024
| Stock (ticker) | Metric |
|---|---|
Schwab US Large-Cap Growth ETF™ (SCHG) | 10-Year Avg. Ann. Return: 15.99% |
Avg. Ann. Return Since Inception (7/27/2020): 15.24% | |
iShares ESG Advanced MSCI EAFE ETF (DMXF) | Avg. Ann. Return Since Inception (6/16/2020): 9.72% |
Direxion NASDAQ-100® Equal Wtd ETF (QQQE) | 10-Year Avg. Ann. Return: 13.27% |
American Century US Quality Growth ETF (QGRO) | Avg. Ann. Return Since Inception (9/10/2018): 14.04% |
10-Year Avg. Ann. Return: 10.50% | |
Fidelity® Enhanced Large Cap Growth ETF (FELG) | 10-Year Avg. Ann. Return: 15.07% |
Vanguard US Momentum Factor ETF VFMO | Avg. Ann. Return Since Inception (2/13/2018): 13.26% |
Vanguard Small-Cap Growth ETF VBK | 10-Year Avg. Ann. Return: 8.22% |
Vanguard Russell 1000 Growth ETF (VONG) | 10-Year Avg. Ann. Return: 15.77% |
Schwab U.S. Large-Cap Growth ETF (SCHG)
Expense Ratio
0.04%
Dividend Yield
0.42%
10-Year Avg. Ann. Return
15.99%
0.04%
0.42%
15.99%
Editor's Take
For those striving to match the large-capitalizationgrowth index returns, look no further. The Schwab U.S. Large-Cap Growth ETF delivers—for an extremely low 0.04% annual expense ratio. This passively managed ETF presents tax-efficient performance from the largest and fastest-growing companies in the investment universe. The 250+ holdings are not cheap, and investors will pay an average cost of $32.00 for one dollar of earnings when investing in SCHG.
The market favored large-capitalization growth firms during the past decade with a stellar 15.05% annualized average return. SCHG’s 10-year performance has surpassed both the category and index returns.
Before investing, however, realize that SCHG is a concentrated fund with 55% of the fund populated by the top 10 holdings. Apple and Microsoft make up a quarter of the fund. As long as large-cap growth continues to shine, investors in SCHG should be rewarded.
SPDR S&P 500 ESG ETF (EFIV)
Expense Ratio
0.10%
Dividend Yield
1.22%
Avg. Ann. Return Since Inception (7/27/2020)
15.24%
0.10%
1.22%
15.24%
Editor's Take
Environmental, social and governance investing, also known as ESG investing, continues to be popular, as evidenced by the creation in 2020 of this SPDR S&P 500 ESG fund.
This S&P 500 index fund selects from a pool of the top 500 companies in the U.S. that meet sustainability criteria related to ESG metrics. The SPDR 500 ESG ETF includes companies in accord with the United Nations Global Compact principles and eschews industries such as weaponry and military contracting, tobacco, thermal coal and oil sands.
The fund’s three-year returns surpass the index and those of the Large Cap Blend category. Roughly 32% of the 316 companies are from the technology sector. Investors will recognize EFIV’s largest holdings: Apple, Microsoft, Amazon, Nvidia and Alphabet, which make up 30% of EFIV. This large-cap ESG fund has benefited from the large-cap growth dominance of recent years.
Direxion NASDAQ-100 Equal Wtd ETF (QQQE)
Expense Ratio
0.35%
Dividend Yield
0.88%
10-Year Avg. Ann. Return
13.27%
0.35%
0.88%
13.27%
Editor's Take
The Nasdaq 100 index represents the largest 100 non-financial companies listed on the Nasdaq stock market exchange, based on market capitalization. The Direxion Nasdaq-100 Equal Weighted ETF allocates the top 100 Nasdaq stocks equally, leading to less exposure to the biggest names, and additional weight on some of the smaller names. This equal weight strategy is designed to deliver growth, with slightly less volatility than its market capitalization weighted peers.
The top 10 holdings of QQQE make up a relatively modest 10% of the fund, leading to a widely diversified and well-balanced fund. Of course, in rising markets, you’ll sacrifice some growth, with an equal-weight fund. The 10-year QQQE performance is better than the large-cap growth category average, while slightly trailing the index.
American Century U.S. Quality Growth ETF (QGRO)
Expense Ratio
0.29%
Dividend Yield
0.32%
Avg. Ann. Return Since Inception (9/10/2018)
14.04%
0.29%
0.32%
14.04%
Editor's Take
The passively managed American Century U.S. Quality Growth ETF tracks large- and mid-capitalizationU.S. companies exhibiting high quality, strong growth and fair valuations. This factor-based ETF follows an investment strategy similar to its American Century U.S. Quality Growth Index benchmark. QGRO devotes greater assets to fast-growing and more fairly based companies.
QGRO has roughly 200 holdings, with 25% in the top 10 holdings. This makes the fund less susceptible to the extreme price movements of a few firms. Unlike the market-cap large-cap growth funds, the top 10 holdings of QGRO are populated with several lesser-known companies, such as Booking Holdings, ServiceNow, Autodesk and Neurocrine Biosciences, in addition to the well-known Alphabet and Microsoft.
Invesco S&P SmallCap Momentum ETF (XSMO)
Expense Ratio
0.39%
Dividend Yield
0.67%
10-Year Avg. Ann. Return
10.50%
0.39%
0.67%
10.50%
Editor's Take
Over the past 10 or more years, small-capitalization stockshave been less popular than their larger-cap brethren. But that doesn’t mean that the previous trend will continue. In fact, we’re seeing signs of a shift favoring small caps right now.
Smaller companies have room to grow, and can add diversification to a large-cap heavy portfolio. The Invesco S&P SmallCap Momentum ETF is patterned after the S&P Smallcap 600 Momentum Index which includes 120 securities with the highest “momentum scores.” Momentum refers to stocks whose prices are trending upwards. XSMO owns fast-growing quality stocks with strong balance sheets.
The XSMO 10-year performance has surpassed that of the index and small-cap growth category by nearly two percent annualized. Currently, this fund is downright cheap, and investors will pay roughly $12 per every dollar of earnings, in contrast with the higher valuation firms of the category and index.
Fidelity Enhanced Large Cap Growth ETF (FELG)
Expense Ratio
0.18%
Dividend Yield
0.18%
10-Year Avg. Ann. Return
15.07%
0.18%
0.18%
15.07%
Editor's Take
The Fidelity Enhanced Large Cap Growth ETF is one of the few actively managed ETFs that sports low fees and strong performance. The fund’s mission is capital appreciation from stocks within the Russell 1000 Growth Index. The fund screens for valuation, growth, profitability and other factors. FELG uses the popular factor-based approach and strives to outperform the Russell 1000 Growth Index.
The fund has high conviction in its top 10 holdings, which make up 53% of FELG. Although branded a large-cap growth ETF, 11% of the companies are from the mid-cap sphere and nearly three percent from the small-cap domain. Forty-five percent of the fund’s companies are from the technology sector with another 26% split between the consumer cyclical and communications services.
FELG’s annualized 10-year return of over 14% surpassed the large-cap growth category and the index returns. Although not cheap, the fund’s price/earnings ratio is lower than that of the category average and the index.
Vanguard U.S. Momentum Factor ETF (VFMO)
Expense Ratio
0.13%
Dividend Yield
0.66%
Avg. Ann. Return Since Inception (2/13/2018)
13.26%
0.13%
0.66%
13.26%
Editor's Take
The Vanguard U.S. Momentum Factor ETF demonstrates the success of the low-fee, factor-driven, actively managed investment approach.
VFMO invests in large-, mid- and small-cap stocks with strong recent performance. The fund’s benchmark is the Russell 3000 Stock Market Index, which spans the majority of public companies in the U.S. The 564 companies owned by VFMO include a large proportion of mid- and small-cap holdings.
The companies in VFMO are among those exhibiting the fastest recent growth, which incurs additional price volatility as well. The lower than category and index average price-to-earnings ratio suggests that the holdings are more reasonably priced than their peers. If you’re seeking a low-priced growth ETF that owns the fastest growing small- and mid-cap companies, consider VFMO.
Vanguard Small-Cap Growth ETF (VBK)
Expense Ratio
0.07%
Dividend Yield
0.70%
10-Year Avg. Ann. Return
8.22%
0.07%
0.70%
8.22%
Editor's Take
Small -cap growth investing is dominating, as the category delivered 26.19% during the previous year. Although the future is unknown, this simple statistic highlights the benefits of a diversified portfolio, as investment styles go in and out of favor. With a negligible expense ratio, The Vanguard Small-Cap Growth ETF is passively managed and attempts to replicate the performance of the S&P SmallCap 600 Growth Index.
The fund is well-diversified with 638 stocks, and the top 10 holdings make up only eight percent of the VBK. None of the stocks make up more than 1% of the fund. Similar to large-cap growth funds, roughly 27% of VBK companies land in the tech sector, with industrials, healthcare and consumer cyclical firms making up the next 48%.
The market cap weighting means that the best performers maintain greater portfolio weightings, while the low fee and broad diversification provide this small-cap growth fund with the likelihood of long-term category matching returns.
Vanguard Russell 1000 Growth ETF (VONG)
Expense Ratio
0.08%
Dividend Yield
0.65%
10-Year Avg. Ann. Return
15.77%
0.08%
0.65%
15.77%
Editor's Take
Representing roughly 93% of the total market capitalization of the U.S. equity market, the Russell 1000 includes the largest 1,000 public companies in the U.S. If you want broader growth ETF exposure beyond the S&P 500 universe, Vanguard Russell 1000 Growth ETF doubles it.
Another low fee passively managed ETF, VONG delivers exposure to 444 high-quality, large U.S. companies, concentrated in the technology sector. VONG is less diversified due to its market capitalization weighting with 52% of the holdings in the top 10 names.
Index fund proponents will benefit from 10 years of category beating returns. A low 14% turnover ratio keeps the high-quality leaders such as Apple, Microsoft, Amazon, Nvidia and Alphabet in the fund’s top spots. VONG hits the growth ETF mark with low fees, and broad coverage of the U.S. equity growth sector. Just beware, that should these large-cap growth stocks falter, so will the fund’s returns.
*Data from Morningstar unless noted; current as of June 5, 2024.
Methodology
We began our exploration for the best growth ETFs with a pool of 3,302 exchange-traded funds. The group of international and U.S. equity ETFs narrowed the pool to 1,368. Our next screen eliminated all funds with management expense ratios above 0.70% and Morningstar Star ratings of two or lower. This weaned the list to 586 funds.
Finally, we excluded all but the growth stock ETFs, from the large-, mid- and small-cap categories, which resulted in a manageable 113 ETFs. These funds were sorted from high to low five-year annualized average returns, and low to high fees.
Our final review includes passively, factor-based and actively-managed funds from the large-, mid- and small-cap growth categories. We included several ESG ETFs, and one equal, versus market-capitalization weighted offer. The 10 best growth ETFs are the best-performing, lowest fee, U.S. and international growth ETFs representing a variety of investment styles, strategies and market capitalizations.
These growth ETFs are appropriate to add to an already diversified investment portfolio and not as a stand-alone complete portfolio.
What Is Growth Investing?
Growth investing is a strategy that aims to buy the stocks of companies that are growing their revenues or cash flows faster than the rest of the market. As the name suggests, growth is the priority—that means growth companies reinvest their profits in order to expand their businesses more rapidly.
Investing in growth companies offers you the chance to earn greater returns from climbing stock prices, but this approach is riskier than other strategies. There’s no guarantee that a growth company will drive greater profitability over the longer term. In addition, growth stocks experience more volatility, marked by dramatic changes in value. It’s an approach that’s best suited for risk-tolerant investors with a longer time horizon.
Growth stocks tend to see strong gains during periods of economic expansion when interest rates are low. After the financial crisis of 2008, for example, growth stocks saw a massive rally that lasted right up until the end of 2021. Over that period, they significantly outperformed value stocks and the S&P 500.
Unfortunately, the era of historically low interest rates and climbing growth stock valuations has ended. With inflation near 40-year highs, the Federal Reserve has embarked on a rate hike campaign that is taking the wind out of the sails of growth stocks.
How Do Growth ETFs Work?
Growth ETFs track an underlying index that identifies growth companies based on a number of factors. Depending on the index, these factors may include growth in earnings, sales and price. Some ETFs also consider value metrics to either find deep growth companies or to find growth companies at a reasonable price.
The ETFs included in our list take different approaches to growth investing. The result is a list of funds with P/E ratios that may be above average. Some funds have heavy concentrations in the top three to five companies, while others do not.
The different approaches to growth are also reflected in both the number of companies in each fund and their average market capitalization. The average market cap ranges from about $50 billion to more than $500 billion. The number of companies in each fund ranged from about 30 to 500.
What to Look for in a Growth ETF
- A low expense ratio. Growth ETFs charge expense ratios, which tell you how much you’ll pay annually to own the fund, expressed as a percentage of your total investment. The annual fee is typically subtracted on a quarterly basis from your returns. In most cases, the larger the fund, the lower the expense ratio.
- A track record of success. Review a fund’s past performance to help inform your investment decisions. Looking at an ETF’s five- and 10-year performance shows you whether management has maintained good returns over time. Just remember, past performance is no guarantee of future results.
- Good diversification. Broad diversification is the biggest strength of ETFs. When choosing a growth ETF, check to see if funds own stocks across a variety of sectors, or whether holdings are largely concentrated among tech stocks. Better sector diversification can help reduce your risk.
- The right fund holdings. It’s always essential to check out a fund’s top holdings and see whether they align with a growth investing strategy and the fund’s investment objective. Remember, every growth fund is different.
Value ETFs vs Growth ETFs: What’s the Difference?
Growth ETFs own companies that are expected to grow their revenue, earnings or cash flows at a faster rate than the overall market, often thanks to innovative technology or unique business models. These companies tend to have higher valuations and lower dividend yields, as they reinvest their earnings to drive more growth.
On the other hand, value ETFs invest in companies that are currently trading at a price lower than their intrinsic value, as determined by factors such as financial statements, earnings, and assets. These value stocks are often more established and have a history of paying dividends.
Growth ETFs can offer higher potential returns, but they also come with greater risk. Value ETFs deliver stability and lower risk, at the cost of a much slower rate of appreciation over time.
Value ETFs vs Growth ETFs: Which Should You Buy?
Investors who want rapid appreciation might prefer to buy growth ETFs, since they offer potentially higher returns if their holdings are able to deliver elevated returns. But growth stocks are more volatile and may be subject to greater risk.
In contrast, value ETFs offer more stability and consistent returns, but may not have the same growth potential as growth ETFs.
Ultimately, the decision to invest in growth ETFs or value ETFs depends on your individual risk tolerance and goals. A diversified portfolio should include both growth and value funds to balance risk and return.
It’s important to conduct thorough research and consult with a financial advisor before making any investment decisions.
How to Buy Growth ETFs
The ETFs listed above provide you with a simple and straightforward way to get exposure to growth stocks. Here’s a simple step-by-step guide to buying growth ETFs:
Open a Brokerage Account. A brokerage account is your gateway to the stock market. The type of account you choose depends on your financial goals. If you’re buying growth ETFs to invest for retirement, choose an individual retirement account (IRA), which offers valuable tax benefits but limits your annual contributions. For more near-term goals, go with a taxable brokerage account.
Research Growth ETFs. Once you’ve opened a brokerage account, research the ETFs most likely to help you reach your goals. Most growth ETFs track the performance of growth stock indexes, and are priced very competitively. But some are active ETFs, where fund managers pick growth stocks and frequently rebalance the fund’s portfolio in an attempt to beat growth indexes. This is a more expensive approach, but it can offer greater returns.
Buy Growth ETFs. You’ll need to transfer cash into your brokerage account in order to buy shares of growth ETFs. Search for your chosen ETF by ticker symbol. Some brokers make it easy to buy shares right in the ticker research section. If not, you’ll need to go to the trade section of the brokerage and enter the ETF’s ticker. Enter the number of shares you want to buy—in most cases you enter a market order, meaning your purchase request goes through at the current price of the ETF instead of holding out for a particular price. Use a limit order to get growth ETF shares at a specified price.
Set Up a Purchase Plan. Investing isn’t a one-and-done thing. You should consider making a plan to buy shares of growth ETFs or other investments regularly to help you reach your goals. Luckily, most brokerages allow you to set up a purchase plan.
Growth ETF FAQs
What’s the difference between growth ETFs and growth stocks?
Growth stocks are individual companies that are growing their revenues and cash flow well above the average. But buying individual stocks can be very risky, since your investment is tied to the performance of one company. Growth ETFs are a basket of hundreds of different growth stocks, which limits your risk exposure.
Should you invest in growth ETFs?
If you want to put some of your portfolio into high-growth stocks, and you’re comfortable with more volatility in exchange for the possibility of getting above-average returns, you should consider investing in growth ETFs. If higher-volatility investments, with their rapid fluctuations in value, make you nervous, it’s probably best to stick with more conservative value ETFs.
What are dividend growth ETFs?
Dividend growth ETFs are not growth stock investments. Instead, dividend growth ETFs invest in stocks that pay dividends and have a demonstrated history of growing dividends consistently over time. The goal is to achieve steadily growing distributions to fund owners, leading to a higher total return.
How do growth ETFs perform in a bear market?
Growth ETFs are higher-risk investments. Since growth stocks have valuations that factor in expectations for strong future growth, any market developments that reduce revenue or cash-flow growth can disappoint growth investors. Unfortunately, a bear market can badly damage the sources of a growth stock’s success, and growth stocks tend to perform poorly during recessions and bear markets.
How many ETFs should I own?
As a general rule of thumb, it’s suggested to have at least five to 10 ETFs in a portfolio to achieve adequate diversification. However, this number can vary depending on the size of the portfolio and the specific investment goals of the investor.
It’s also important to regularly review and rebalance the portfolio to ensure it stays aligned with the investor’s goals and risk tolerance. The number of ETFs an investor should own is a personal decision based on their circ*mstances and investment objectives.
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