Top 6 Growth ETFs in 2022

Investing in growth stocks can produce substantial returns for your portfolio. But picking individual stocks isn’t for everyone. Growth stocks are generally harder to evaluate since their valuations are based largely on their long-term potential, which creates a lot of uncertainty for investors.

Many investors interested in growth stocks could benefit from investing in growth exchange-traded funds (ETFs). These ETFs will invest in a large basket of growth stocks, giving investors exposure to the types of investments with massive potential for big capital returns without the need to analyze individual companies. Here are six growth ETFs to consider.

Fund NameTickerExpense RatioNet Assets
Vanguard GrowthVUG0.04%$169.4 billion
Vanguard Mega-Cap GrowthMGK0.07%$13.2 billion
iShares Russell Mid-Cap GrowthIWP0.23%$12.5 billion
Vanguard Small-Cap GrowthVBK0.07%$32 billion
iShares MSCI EAFE GrowthEFG0.35%$10.1 billion
ARK InnovationARKK0.75%$13 billion

DATA SOURCE: VANGUARD, ISHARES, ARK FUNDS. TABLE SOURCE: AUTHOR.

Vanguard Growth ETF

The Vanguard Growth ETF (NYSEMKT:VUG) is a large-cap growth stock ETF. The fund aims to replicate the CRSP U.S. Large Cap Growth Index, which constitutes half of the CRSP U.S. Large Cap Index. The latter comprises the top 85% of U.S. stocks weighted by market capitalization, which includes companies with market caps as small as $535 million. So, while the index is primarily composed of large-cap stocks, it includes some mid-cap stocks as well. Those are filtered by certain metrics, such as earnings-per-share growth and return on assets, to divide the index into half — one half growth stock, the other value stocks.

While weighting the fund by market capitalization keeps fees and asset turnover low, it results in heavy allocations toward the market’s biggest companies. The 10 largest holdings account for more than 50% of the portfolio. Likewise, more than 50% of the portfolio is invested in technology companies.

The ETF boasts an impressive tracking history. Over the past 10 years, it trailed its benchmark index by just 6 basis points, which is right in line with its minuscule expense ratio. With an expense ratio of just 0.04%, the Vanguard Growth ETF is one of the most efficient ways to gain additional exposure to growth stocks in your portfolio.

Vanguard Mega-Cap Growth ETF

For those who believe the big winners will keep winning, the Vanguard Mega-Cap Growth ETF (NYSEMKT:MGK) may be a good option to add growth stocks to your portfolio.

The ETF tracks the CRSP US Mega Cap Growth Index, which is based on the CRSP US Mega Cap Index. The latter collects stocks in the top 70% of market capitalization, which includes those as small as $1.9 billion. The index is filtered by factors including earnings per share (EPS) growth and return on assets to divide the stock universe in half — one half growth stocks and the other half value stocks.

The smaller stock universe means the Vanguard Mega-Cap Growth ETF is even more concentrated in the biggest names in the stock market. The top 10 holdings account for more than 60% of the portfolio. It’s even more heavily weighted toward technology growth stocks than the Vanguard Growth ETF. Despite the smaller index, Vanguard manages to keep its asset turnover roughly the same as the Vanguard Growth ETF. Likewise, its tracking error is very small, about 8 basis points, right in line with its expense ratio.

If you’d like greater exposure to the biggest growth stocks in the market, the Vanguard Mega-Cap Growth ETF has a very low expense ratio of just 0.07%. 

iShares Russell Mid-Cap Growth ETF

Mid-cap stocks may offer more room for capital appreciation without taking on the risk of small-cap stocks. For those looking to strike the balance, the iShares Russell Mid-Cap Growth ETF (NYSEMKT:IWP) may be for you.

The ETF tracks the Russell Midcap Growth Index, which tracks the half of the mid-cap market with strong earnings-growth expectations and high price-to-book ratios. The mid-cap index is composed of the smallest 800 stocks within the Russell 1000 Index, which includes companies with market caps ranging from around $300 million to $52 billion.

The iShares Russell Mid-Cap Growth ETF holds a much more¬†diversified portfolio¬†than its large- and mega-cap counterparts. The top 10 holdings account for just… Continue Reading at THE MOTLEY FOOL

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