Invest in these Expanding ETFs with $1,000 for a Lifetime of Growth:
Ready to skip the grind of managing growth portfolios? It's all possible, thanks to the magic of exchange-traded funds (ETFs)! These bad boys let professionals handle the stock selection and portfolio maintenance for you. If you've got a cool grand burnin' a hole in your pocket, consider sinking it into shares of one of these three growth ETFs.
iShares S&P 500 Growth ETF (AKA IVW)
When on the hunt for a growth-oriented ETF, you'll definitely cross paths with the usual suspects like the Vanguard Growth ETF (VUG) or the iShares Russell 1000 Growth ETF (IWF). And while they're solid choices, they've got one major drawback: they're super top-heavy! Almost a third of their worth is tied up in Apple, Microsoft, and Nvidia, with the addition of Amazon and Meta Platforms (Facebook's parent) bringing their top five holdings to nearly half their total value.
Not so with the iShares S&P 500 Growth ETF (IVW). Sure, it's not a so-called "equal weight" fund (those hold equal-sized stakes in every stock they own, regardless of market cap), but it's far from top-heavy. The top five IVW holdings account for roughly one-third of its total assets, and the top three make up just one-quarter of its value. Plus, since it's based on the S&P 500 Growth Index, which considers momentum as one of its inclusion factors, its allocation looks way different from those of more popular funds. At this moment, Nvidia heads the pack, followed by Microsoft, then Apple, then Meta, and Amazon. That's a pretty sharp contrast from each company's current market caps!
Now, you might think that doesn't matter much, but every little detail counts when you're in it for the long haul. The longer time rolls on, the more these little differences start to matter.
Vanguard Mid-Cap Growth ETF (Ain't Nobody Got Time for Small Caps!)
Chances are, most of the growth stocks you've got stashed away are large-cap names. And that's all good and fine. These are the companies you hear about the most. But focusing solely on large caps means you're missing out on a whole lot of mid-cap stocks with higher odds of better growth. That's where mid-cap stocks come in, and especially mid-cap growth stocks.
There are plenty of ETFs to choose from in this sector, like the iShares S&P Mid-Cap 400 Growth ETF (IJK). But if you've got your heart set on the Vanguard Mid-Cap Growth ETF (VOT) instead, you're arguably making a smarter move.
Why? Well, the iShares mid-cap fund is limited to stocks within the S&P 400, but those 400 stocks aren't the market's only mid-cap names. They're handpicked by Standard & Poor's for inclusion in the index.
On the other hand, the Vanguard Mid-Cap Growth ETF is built to reflect the holdings and performance of the CRSP (Center for Research in Security Prices) US Mid-Cap Growth Index. It's got fewer stocks, but also arguably offers better sector-based balance and a higher overall quality of holdings. Names found within the VOT that aren't held by the iShares S&P Mid-Cap 400 Growth ETF include Constellation Energy and Palantir Technologies. The former's been a strangely productive utility ticker since 2022, and the latter's been one of the market's best-performing artificial intelligence stocks since 2023.
Long-term holders of the Vanguard fund might not always be so lucky, but given the limitations of what's allowed in the S&P 400 Mid Cap Growth index, Vanguard's option is likely the better bet more often than not.
Technology Select Sector SPDR Fund (Because Tech is Where It's At!)
Last but certainly not least, toss the Technology Select Sector SPDR Fund (XLK) onto your investment radar if you've got a grand you're ready to commit to reaching a growth goal. You'll notice it's the only sector-based fund to make the cut. That's on purpose: while every sector's got its risk-adjusted upside, technology companies historically offer investors the greatest potential for growth.
The world's most meaningful and lucrative sociocultural advancements, like personal computers, mobile phones, and artificial intelligence, have all been rooted in technology. And that's not likely to change any time soon.
There's just one not-so-small detail to consider if you're planning on jumping into this particular ETF. It's not especially well-balanced. Like the other funds we've talked about, it's pretty top-heavy, with Apple, Nvidia, and Microsoft collective making up 40% of its assets. Adding its positions in Broadcom and Salesforce brings the top five holdings to nearly half the ETF's total value. But in a world where innovation and growth are the name of the game, sometimes you've just got to take a leap of faith and trust that the overall premise makes long-term sense, even if shuffles in the market's leading technology names create above-average short-term volatility. After all, you're not just buying individual stocks; you're investing in an entire world-changing sector. That requires a bigger-picture mindset with slightly different expectations.
And hey, you never know - diversifying your portfolio with a few different funds might not be a bad idea, either!
- Arguably, investing in the Vanguard Mid-Cap Growth ETF (VOT) provides a more balanced and potentially superior selection of mid-cap growth stocks compared to other ETFs in the same sector.
- The iShares S&P 500 Growth ETF (IVW) stands out from other growth-oriented ETFs due to its relatively even distribution of assets, with the top three holdings accounting for only one-quarter of its value.
- If you're focused on reaching a specific growth goal and are ready to invest a grand, the Technology Select Sector SPDR Fund (XLK) could be an excellent choice, despite its top-heavy composition, due to technology offering historically high potential for growth.
- When initially selecting ETFs, it's crucial to consider the specific objectives and potential drawbacks of each fund, as every little detail can matter in the long run. For instance, the iShares S&P Mid-Cap 400 Growth ETF (IJK) has a more limited range of included stocks compared to the Vanguard Mid-Cap Growth ETF (VOT).
