Brian Armor: Growth ETFs invest in stocks in anticipation of future growth. Their prices reflect that expectations, clarifying higher hurdles compared to cheaper and more valuable peers. For this reason, growth stocks tend to be more volatile. But the past two years have turned them upside down. From the start of 2023 until January 2025, big growth stocks outperform the remaining markets. As a proper example, the Morningstar US Great Growth Index over the Morningstar US Great Value Index by 23 percentage points, highlighting half of its volatility. But the other side of volatility grew an ugly head in 2022, when the growth index gave up more than 40% points.
For better or worse, big years tend to characterize growth investments. Our favorite growth ETF finds a way to kick out more winners than losers. Let's start with three big growth ETFs for 2025.
Three big growth ETFs for 2025
- Vanguard International Dividend Appreciation ETF Vigi
- T. Rowe Price Blue Chip Growing ETF TCHP
- Neuberger Berman Small-Mid Cap NBSM
The first on my list is the Vanguard International Dividend Appreciation ETF, Ticker Vigi, a gold rating. The ETF will draw in large and interim stocks from foreign developed and emerging markets that have increased dividend payments for at least seven years in a row. They then remove the highest high-yield names from that cohort, and their holdings are financially stable and are more likely to continue paying dividends. The result is a high quality, stable business portfolio.
Cost control creates durable benefits for Vigi. The 10 basis points fee is one of the lowest in the foreign big growth morning star category. It then weights holdings by market capitalization, reducing sales and the associated transaction costs.
High quality and low cost were a winning combination. That's why I own this ETF. Vigi is one of the least volatile funds in its category, but it's better than the average category peer. We hope that we will continue to outperform our peers on a risk-adjusted basis in the future.
The second on my list is the silver-rated T. Rowe Price Blue chip growth ETF, and ticker TCHP. This non-transparent ETF holds a strong, growing and defensive company with sustainability. A pool of talented managers and deep analysts can help you identify these high-flying companies.
The portfolio is currently located in 75 companies, with most of its assets investing in “magnificent seven” stocks, including NVIDIA NVDA, Microsoft MSFT, and Apple AAPL. Still, this strategy hunts growth stories in both the public and private markets, even ticking small allocations to foreign developed market companies.
Basic research on quality defines the success of this ETF. However, this ETF is not for the faint of heart. Since its launch in 2020, it has been more volatile than the average peer. Over the past 15 years, mutual funds have returned over 16% per year, falling to the highest quartile of peers in the big growth category. We expect long-term outperformance to last, but we expect some bumps on the road along the road.
The last on my list is the silver-rated Neuberger Berman small cap, Ticker NBSM. The ETF does not explicitly target growth stocks, but instead is looking for beneficial and high quality companies with a modest rating. The ETF only started last year, but the manager has been involved in managing the strategy on another account for over 30 years.
Deep resources and long-time teams pilot the vessel. The manager is patient and orderly in his approach. They tend to start positions small and build them, as they support the strength of the company. They also slowly trim the winners, creating space for new picks and bringing the portfolio back to small businesses. The results tend to be a 45-60 stock portfolio of medium-growing companies that span the boundary between the small and medium-sized Morningstar-style boxes.
Growth at reasonable prices is hard to do well, but this team answered the phone. Despite its lean portfolio, this ETF should significantly reduce risk compared to its peers without giving up on performance. Mutual fund brother Neuberger Berman Genesis has posted a bottom-quinti-like volatility in that category despite excluding the average category in total returns over the past decade. We expect this ETF to follow a similar trajectory.
That's it for today. Feel free to share your thoughts on this list with me at X @mstararmour Follow Morningstar ETF coverage morningstar.com/topics/etfs. Happy investment.
Watch these four dividend ETFs hit the right balance for income investors for more from Brian Armour.
