Although stocks have recently given back some of their short-term gains, the market big picture remains within the frame of momentum, which makes for a good environment to look to growth exchange-traded funds (ETFs).
Although the market has seen a few setbacks over the past two weeks, a small dose of negativity in financial markets does not change the overall direction of the U.S. economy.
With unemployment low, consumer confidence high, corporate earnings healthy and interest rates low and slowly creeping upward, the economy is clearly in the mature phase of the business cycle, which is the phase that favors growth stocks.
Since the Federal Reserve recently signaled it has not changed its stance on monetary policy, even with Fed Chair Janet Yellen on the way out, the current economic and market conditions show no signs of recession in 2018. This all adds up to another good year for growth stocks.
With that backdrop, and in no particular order, here are seven of the best growth ETFs to consider for your portfolio now:
7 Best Growth ETFs: Powershares QQQ (QQQ)
Expense Ratio: 0.2%, or $20 per $10,000 invested annually
When growth is in favor, you can expect Powershares QQQ (NYSEARCA:QQQ) to be a leader.
The QQQ portfolio tracks the NASDAQ-100 Index, which consists of about 100 of the largest U.S. and international non-financial stocks, measured by market capitalization, listed on the NASDAQ Index.
This means shareholders get a mix of about 60% technology stocks, such as Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT) and Amazon.com, Inc. (NASDAQ:AMZN), with the balance consisting of stocks from other growth sectors like consumer discretionary and health.
Expenses for QQQ are cheap at 0.2%, or $20 for every $10,000 invested.
7 Best Growth ETFs: Technology Select Sector SPDR (XLK)
Expense Ratio: 0.13%
The technology sector is synonymous with growth and the best tech ETFs like the Technology Select Sector SPDR (NYSEARCA:XLK).
When the growth style is in favor, it is often technology stocks like XLK top holdings AAPL, MSFT and Facebook Inc (NASDAQ:FB) that lead the market.
More specifically, the XLK portfolio consists of stocks in the S&P 500 index that are in the technology and telecom sectors. Therefore, shareholders get exposure to large-cap stocks of companies in several technology sub-sectors, such as computer hardware and software, communication services and equipment, internet applications, and electronic equipment.
The expense ratio for XLK is 0.13%.
7 Best Growth ETFs: Vanguard Growth ETF (VUG)
Expense Ratio: 0.06%
If you want to passively invest in U.S. large-cap growth stocks, you would be wise to do it with a low-cost growth fund like Vanguard Growth ETF (NYSEARCA:VUG).
VUG tracks the CRSP U.S. Large Cap Growth Index, which consists of about 300 U.S. large-cap stocks like AAPL, Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) and AMZN.
This broad mix of stocks with growth potential, combined with the rock-bottom expense ratio of 0.06%, makes VUG a smart choice for cheap exposure to large-cap growth.
7 Best Growth ETFs: Vanguard Mid-Cap Growth ETF (VTU)
Expense Ratio: 0.07%
ETFs with low expenses are generally the best to buy. For the mid-cap growth space, you’ll want to take a look at Vanguard Mid-Cap Growth ETF (NYSEARCA:VOT).
VTU tracks the CRSP US Mid Cap Growth Index, which includes approximately 150 stocks, most of which are mid-caps, although a small percentage of the holdings have market caps above the conventional mid-cap range of $5 billion to $10 billion.
Top holdings include Fiserv Inc (NYSE:FISV), Amphenol Corporation (NYSE:APH) and Roper Technologies Inc (NYSE:ROP), and the expenses are extremely low at 0.07%.
7 Best Growth ETFs: Vanguard Small-Cap Growth ETF (VBK)
Expense Ratio: 0.07%
If you want potential for greater long-term returns than mid- and large-caps have historically produced, and you don’t mind taking more market risk to get them, the Vanguard Small-Cap Growth ETF (NYSE:VBK) is a smart choice.
The VBK portfolio attempts to replicate the returns of the CRSP US Small Cap Growth Index, which covers about 650 U.S. stocks with a median market cap of $4.6 billion.
Top holdings include Diamondback Energy Inc (NASDAQ:FANG), XPO Logistics Inc (NYSE:XPO), Nektar Therapeutics (NASDAQ:NKTR). Expenses are far below category average.
7 Best Growth ETFs: iShares MSCI EAFE Growth (EFG)
Expense Ratio: 0.4%
Investors looking for low-cost, broad exposure to international growth stocks will like iShares MSCI EAFE Growth (NYSEARCA:EFG).
EFG offers shareholders diversified coverage of companies in Europe, Australia, and the Far East. To do this, it passively tracks the MSCI EAFE Growth Index, which includes more than 500 non-U.S. stocks.
Most of the stocks are large-cap internationals like Nestle SA (OTCMKTS:NSRGF), Roche Holdings (OTCMKTS:RHHBF), and British American Tobacco (OTCMKTS:BTAFF). Expenses for EFG are 0.4%.
7 Best Growth ETFs: iShares NASDAQ Biotechnology (IBB)
Expense Ratio: 0.47%
One of the hottest sectors for growth is biotechnology and one of the best ETFs to cover the sector is iShares NASDAQ Biotechnology Index (ETF) (NYSEARCA:IBB).
IBB offers exposure to about 200 biotechnology and pharmaceutical stocks, most of which are big U.S. names like Gilead Sciences, Inc. (NASDAQ:GILD), Biogen Inc (NASDAQ:BIIB) and Amgen, Inc. (NASDAQ:AMGN).
Although price volatility can be significant in the short term for this ETF, the long-term growth for IBB can be worth the market risk.
Expenses for IBB are 0.47%.
As of this writing, Kent Thune did not personally hold a position in any of the aforementioned securities. However, he holds XLK and QQQ in some client accounts. Under no circumstances does this information represent a recommendation to buy or sell securities.