It might be beneficial to explore some unconventional options or at least adjust your approach to invest in growth stocks.
If you’ve been in the investing game for a while, you probably know that while growth stocks can deliver high returns, selecting and tracking them can be quite demanding. Many growth sectors are in a state of rapid and constant evolution. Keeping up can feel like a full-time job. If you don’t pay attention, you could end up holding the wrong stocks at a bad time.
There’s a simpler solution. Instead of investing in individual growth stocks, consider a collection of top growth options in the form of exchange-traded funds (ETFs). While this might not be as thrilling as picking individual successful stocks, it’s definitely less stressful. Plus, the long-term benefits typically outweigh the quick wins since you won’t be trading as frequently. Frequent transactions can eat into your returns over time.
Let’s look into three growth ETFs you might want to consider for a longer-term hold, assuming you have around $500 or so to invest.
Vanguard Growth ETF
There’s nothing wrong with holding several growth ETFs, but if you’re limited to just one, Vanguard Growth ETF (Vug -0.01%)) should definitely be your top choice.
This ETF aims to reflect the performance of the CRSP US large-cap growth index, which consists of major U.S. growth stocks. Not surprisingly, it heavily features tech giants like Microsoft, Nvidia, and Apple in its top holdings.
Other names in this index include Snap, AI-related companies like CoreWeave, and fintech player Interactive Brokers, though they take up only a small percentage of the overall holdings. There’s also a smattering of stocks from various sectors, like entertainment and healthcare.
The main advantage of the Vanguard Growth ETF mirrors that of other Vanguard funds—specifically, its incredibly low expense ratio of just 0.04%. This means you keep most of the gains that come from your investments.
Invesco Nasdaq Next Gen 100 ETF
You’ve likely heard of the Invesco QQQ Trust, which tracks the Nasdaq 100 index. With over $360 billion in assets, it’s one of the largest and most well-known ETFs out there.
However, there’s a drawback to QQQ—it’s not particularly diversified anymore. Many of the fastest-growing stocks are tech companies on the NASDAQ, which leads to a heavy concentration; tech makes up about 60% of the fund, with half the portfolio value tied up in just a few firms.
When you think of giants like Nvidia, Microsoft, and Apple, along with Amazon and Broadcom, these stocks have become quite crowded and expensive.
A practical alternative is the Invesco Nasdaq Next Gen 100 ETF (qqqj -0.30%)). This ETF focuses on the next 100 largest names beyond those in the Nasdaq 100. It includes promising companies like Monolithic Power Systems, Super Micro Computer, Seagate Technology, plus many others.
The idea is that some of these companies may eventually rise into the ranks of the Nasdaq 100, rewarding investors down the line.
The premise has proven correct in the past, as names like Microsoft and Nvidia weren’t always in the index but have done very well. This ETF is also carefully balanced, ensuring no single stock exceeds 3% of the total.
Just keep in mind, it’s a long-term investment. It may take years or even decades for the full potential to materialize.
Ishares Russell 1000 Growth ETF
Finally, consider adding the Ishares Russell 1000 Growth ETF (IWF) 0.01%)) to your lineup of ETFs to hold for the long haul.
This fund behaves somewhat like both the Vanguard Growth ETF and the Invesco Nasdaq Next Gen 100 ETF. It holds substantial shares in popular firms like Nvidia, Microsoft, and Apple. Designed to mirror the Russell 1000 growth index, it encompasses a broad range of stocks, including many midcaps that might not appear in the large-cap growth index or the Invesco ETF.
You might also find smaller stocks, such as Marvell Technology, and Super Micro Computer, which are likely to benefit from the expanding AI market and the data it generates.
While you may not have vast exposure to midcaps, they are collectively significant enough.
Investing in any or all of these ETFs can be a smart move, even if you already own the SPDR S&P 500 ETF Trust or Vanguard S&P 500 ETF. These three growth-oriented ETFs, while heavy on tech, offer enough diversity to make them worth considering, especially because a significant portion of the S&P 500 is also tech-driven. It’s not a bad idea to have at least a small stake in something beyond just tech growth.
