Want a safe way to participate in this year’s market rally? Consider taking a position in a growth exchange-traded fund (ETF).
These are passive rather than actively managed investments that typically track the performance of a particular stock index or basket of equities. Benefits of putting money into ETFs include diversification and broad exposure, both of which help to lessen risk when it comes to investor’s capital.
ETFs typically have less fees than actively managed investment vehicles such as mutual funds, and they often pay quarterly dividends, which also make them attractive options. With the stock market rally looking likely to continue through year’s end, now is a good time to focus on securities with high growth potential. Growth ETFs can help to significantly boost a portfolio over time.
Here are three of the year’s top growth ETFs as of this month.
Invesco QQQ (QQQ)
Arguably the best-known ETF on this list is the Invesco QQQ (NASDAQ:QQQ). Known as the “Triple Q” or simply the “Q,” this exchange-traded fund tracks the Nasdaq 100 index and includes shares in many of the biggest and most popular technology companies such as Apple (NASDAQ:AAPL), Nvidia (NASDAQ:NVDA) and Tesla (NASDAQ:TSLA). Given its focus on big tech, the QQQ has a history of delivering outsized gains to shareholders.
So far in 2023, the QQQ ETF is up 42%. Through five years, the fund boasts a gain of 107%, and that’s after the “tech wreck” of 2022. Other reasons to be bullish about this fund are the fact that there is no minimal investment required and the fee charged is reasonable at 0.20%. The fund holds 101 stocks, 57% of which are of technology companies. The QQQ currently has $205 billion of assets under management, and has a dividend yield of 0.54% for an annual payment to stockholders of $2.02 per share.
iShares S&P 500 Growth ETF (IVW)
The iShares S&P 500 Growth ETF (NYSEARCA:IVW) is comprised of large-capitalization U.S. equities that are listed on the benchmark S&P 500 index and whose earnings are expected to grow at an above-average rate relative to the broader market. Top holdings in IVW include Apple, UnitedHealth Group (NYSE:UNH), and Visa (NYSE:V). In all, this ETF has 233 holdings.
It is not an exact mirror of the S&P 500 and its performance is a bit better, up 23% this year versus an 18% gain in the benchmark index. Management fees for the IVW ETF are reasonable at 0.18%, and the fund pays a quarterly dividend that yields 0.84% for an annual distribution of 59 cents.
In terms of performance, IVW has increased 66% over the last five years, again slightly better than the 59% return in the S&P 500. Investors looking for the security of an exchange-traded fund but who want better than market returns, the iShares S&P 500 Growth ETF should fit the bill.
Vanguard Russell 2000 ETF (VTWO)
The current market rally is broadening out and starting to include smaller stocks, making now an opportune time to invest in the Vanguard Russell 2000 ETF (NASDAQ: VTWO), comprised of 2,022 of the smallest publicly traded companies in the U.S. It’s a great way to track leading small-cap stocks in the U.S. or equities that have a market capitalization of $250 million to $2 billion.
Year to date, VTWO is up a healthy 12%. More gains could be in the offering if the market rally lifts all boats. Like most Vanguard funds, the Russell 2000 ETF comes with a rock bottom management expense ratio of 0.10%.
Top holdings in this fund include smaller companies that many investors may have never heard of, such as Rambus (NASDAQ:RMBS) and Chart Industries (NYSE:GTLS). The fund pays a quarterly dividend of 23 cents, which is good for a yield of 1.20%.