Growth is shining bright in 2017. Investors typically prize growth stocks because these securities are expected to deliver above-average earnings expansion, which naturally drives prices through the roof. That sounds good (it is good) but investors have a few other considerations to mull over before — considerations that might make Vanguard ETFs a better play on the space than straight-up stock picking.
“Investors exploring a factor-based investing approach, however, have additional and crucial issues to consider, including their tolerance for active risk, the investment rationale supporting specific factors, and the cyclical variation of factor-based performance,” according to Vanguard research.
When it comes to growth, risk is indeed a consideration. Stocks that are classified as growth names are historically more volatile than those that viewed as quality or value names.
Plus, it is rare that growth stocks pay substantial dividends or feature dividends at all, meaning investors are banking solely on price appreciation when embracing growth stocks or growth ETFs.
In short, stock picking with growth can be tricky. More conservative investors, then, should consider Vanguard ETFs that are geared toward growth, as they offer Vanguard’s traditional low costs while still providing plenty of upside potential.