A Good Growth ETF Could Transform Your Portfolio
The S&P 500 index has gained nearly 242% in total returns over the last ten years. Investing in index tracking funds, like the S&P 500 ETF, is a sound strategy for reducing risk. Growth stocks and exchange-traded funds (ETFs) can help boost your returns over time.
Growth stocks represent companies that have above-average revenues. Conversely, growth ETFs consist solely of these stocks. While it’s hard to predict how investments will perform in the future, many believe three specific ETFs could outperform the S&P 500 in the coming years.
1. Schwab US Large-Cap Growth ETF
The Schwab US Large-Cap Growth ETF (SCHG) comprises 197 large-cap stocks, with nearly half sourced from the technology sector.
These stocks are from companies valued at a minimum of $10 billion, placing them among the largest and most robust organizations globally. This ETF focuses exclusively on large caps, allowing you to benefit from their growth while managing risk.
It has a remarkable track record, achieving nearly 394% total returns over the past decade—a stark contrast to the S&P 500’s 242%. So, if you had invested $10,000 a decade ago, you’d be looking at almost $50,000 today. Keep in mind, though, past performances don’t guarantee future success. While this ETF has consistently done better than the S&P 500, there’s no assurance it will continue to do so.
That said, it’s a growth-focused fund with stocks that typically show robust potential, suggesting it may outperform the market for years to come.
2. iShares Core S&P 500 Growth ETF
The iShares Core S&P 500 Growth ETF (IVW) shares some similarities with Schwab’s offering, but it specifically targets high-growth companies within the S&P 500.
This fund is made up entirely of large stocks. Entry to the S&P 500 comes with strict criteria, ensuring many of its listed companies are quite powerful. Stocks in this fund are likely to rebound faster after economic downturns since they belong to leading firms.
Although it has yielded a bit less than the Schwab ETF, with total returns around 335% over the last decade, it remains a formidable option that surpasses the S&P 500 overall.
This ETF could suit investors wanting to limit risk while still seeking above-average returns. Despite being a major player, it still has considerable growth potential.
3. Vanguard Information Technology ETF
If you’re open to taking on more risk for potentially massive returns, you might consider the Vanguard Information Technology ETF (VGT). This ETF is solely focused on the high-tech sector, known for its significant revenue potential.
Its top holdings include Nvidia, Microsoft, and Apple. Yet, it also features over 300 other tech stocks.
Performance-wise, this ETF has completely outperformed the S&P 500, with total returns nearing 630% in the last decade. So, if you’d invested $10,000 a decade ago, you would have around $73,000 today.
However, beware of the higher risk associated, especially in the short term. The tech sector can be volatile, and during downturns, this ETF has faced significant challenges. It’s advisable to avoid investing money you may need in the next five years and consider a long-term strategy despite potential short-term hiccups.
This ETF shouldn’t be your sole investment. Diversifying your portfolio with at least 25-30 stocks or a couple of ETFs can help mitigate risk.
Although we can’t predict exactly how investments will evolve, these three ETFs concentrate on growth and have shown a history of outpacing the market. Continuous investment could lead to favorable returns down the line.
