So-called “aggressive growth” exchange-traded funds are geared toward exactly that: aggressive growth stocks, which typically come with some heightened risk. But that’s the cracked egg that makes the omelet.
Investors of most stripes should have at least some money allocated toward riskier growth stocks. And aggressive growth ETFs might be some of the most interesting funds available. That’s because the niche includes things like “thematic” funds that play on some of the market’s biggest mega-trends, as well as exotic ETF strategies that squeeze growth potential out of various areas of the market.
Here are 10 ways to add aggressive growth to your portfolio.
SPDR S&P Internet ETF (ticker: XWEB). The dot-com bubble burst of 2000 scared a number of investors off internet stocks — but, of course, those who swore off internet stocks missed out on the rip-roaring gains of Amazon.com ( AMZN) and Facebook ( FB).
While the internet is an aging growth industry, it’s a growth industry nonetheless. The XWEB ETF is one of the most direct ways to invest here, offering exposure to the likes of enterprise software provider New Relic ( NEWR) and file sharing firm Box ( BOX). Its equal-weight methodology ensures that no single company can cripple the fund; the largest weight for any one stock is only around 2.2 percent. Expenses are 0.35 percent, or $35 annually for every $10,000 invested.
[See: The 25 Best Blue-Chip Stocks to Buy for 2017.]
Amplify Online Retail ETF (IBUY). One of the biggest growth engines in the internet space has been online retail, and that should continue considering global online sales are projected to more than double between 2013 and 2018. You can harness this potential via Amplify’s IBUY ETF, which invests in a basket of 40 companies that derive at least 70 percent of their revenues from online or virtual sales. Holdings are split among so-called “traditional” online retailers like Wayfair ( W), online marketplaces like eBay ( EBAY) and online travel marketplaces like Expedia ( EXPE). Expenses are 0.65 percent.
PureFunds Drone Economy Strategy ETF (IFLY). Amazon has long piqued Americans’ interest in drones with promises of eventual drone delivery, but many other publicly traded companies have already made a practical dent in the space. IFLY holds 44 “primary” and “secondary” drone companies that are weighted (up to a certain cap) based on the drone component of their business.
IFLY holds a few blue-chips like Boeing Co. ( BA) and Honeywell International ( HON), but the real risk potential comes from the likes small-caps AeroVironment ( AVAV), an unmanned aircraft specialist, and Parrot SA, a French wireless products manufacturer — both of which are weighted at around 10 percent. Expenses are 0.75 percent.
The Health and Fitness ETF (FITS). The health and fitness industry is a risky one indeed because of its fad-centric nature. Still, given a growing global awareness of and focus on improving human health, it’s an area of the market that is always packed with potential. FITS is most heavily invested in the fitness industry — specifically, fitness apparel. Nike ( NKE) makes up a whopping 20 percent of the fund, while another 20 percent is in Adidas. Six percent of the fund is in Japanese cycling company Shimano and another 5 percent or so is invested in Foot Locker ( FL). FITS hold 80 stocks, but roughly half its weight is concentrated in just four stocks — so beware the top-heaviness. Expenses are 0.5 percent.
Global X Gold Explorers ETF (GOEX). Gold exploration is one of the riskiest ways to invest in gold, but it also provides some of the most explosive growth potential. That’s because even whiffs of success finding new sources of gold tend to drive stock prices through the roof, in part because of merger and acquisition interest. GOEX invests in 52 gold exploration companies, clustered heavily in Canada (83 percent) with some significant exposure to Australia (12 percent). GOEX also is heavily concentrated on the single-stock level, with First Mining Finance Corp. — currently in penny-stock status — making up 16 percent of the fund. Expenses are 0.66 percent.
[Read: Artificial Intelligence Stocks: 10 Companies Betting on AI.]
First Trust RiverFront Dynamic Developed International (RFDI). Not all aggressive growth ETFs are industry-specific. First Trust’s RFDI is one of several geographically centered ETFs in the space, with this one dedicated to developed markets such as Japan (21 percent), the U.K. (15 percent) and Germany (9 percent). RFDI uses a proprietary methodology that focuses on momentum, among other factors, and also utilizes currency hedging. Here, however, overweights are not an issue, as the top holding currently is British American Tobacco ( BTI) at 1.8 percent, followed by SAP SE ( SAP) at 1.5 percent and Banco Santander ( SAN) at just 1.4 percent. Expenses are 0.83 percent.
Franklin LibertyQ Emerging Markets ETF (FLQE). The FLQE is an aggressive growth fund that actually tries to limit risk somewhat, using four investment style factors — quality, value, momentum and low volatility — to determine its portfolio. FLQE offers exposure to 16 countries, with the largest weights going to the relatively stable markets of South Korea (17 percent) and Taiwan (14 percent). Also, despite trying to avoid risk, FLQE is heavily invested in growth areas like information technology (20 percent) and consumer discretionary (14 percent). As a note, while FLQE invests in stocks, it also buys funds like the iShares MSCI India ETF ( INDA) to gain exposure. Expenses are 0.55 percent.
Janus Small/Mid Cap Growth Alpha ETF (JSMD). Investors typically seek out growth from the mid- and small-cap areas of the market, often buying index funds to access broad swaths of smaller stocks. Janus’ JSMD tries to deliver alpha by evaluating factors including profitability and capital efficiency to “deliver sustainable growth in a variety of market environments.” JSMD is just over a year old, but since its Feb. 23, 2016 inception it’s managed to beat the Russell 2500 Growth Index’s returns.
JSMD is tilted toward IT (28 percent), industrials (20 percent) and health care (18 percent), with top holdings including VMware ( VMW) and Arista Networks ( ANET). Expenses are 0.5 percent.
Guggenheim U.S. Large Cap Optimized Volatility ETF (OVLC). Still, investors can grab plenty of growth out of large-cap stocks as well. OVLC looks to turbocharge the returns of Standard & Poor’s 500 index companies by essentially making aggressive bets in high-reward/low-risk environments, then ducking into lower-volatility solutions when the going gets tough. The fund also tamps down volatility by maxing out any stock’s weight at 3 percent at rebalancing. Right now, OVLC holds just more than 100 stocks, led by Exxon Mobil Corp. ( XOM), AT&T ( T) and Apple ( AAPL). OVLC, at 30 basis points in expenses, is fairly inexpensive for this kind of smart-beta fund.
[See: 7 of the Best Stocks to Buy for 2017.]
PowerShares DWA Tactical Sector Rotation Portfolio (DWTR). Last but not least — but certainly sleek — is PowerShares’ DWTR, a four-holding “fund of funds” that uses ETFs to target relative strength in the market and invest there. The DWTR at any given moment will invest in up to four of nine sector funds to capture momentum, and will go partially to cash when there’s not enough relative strength to chase. At the moment, DWTR is invested in four DWA sector ETFs — Industrials ( PRN), Financial ( PFI), Energy ( PXI) and Technology ( PTF). While management expenses for this ETF are just 15 basis points annually, acquired fund fees from its holdings tack on another 60 bps.
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10 ETFs to Buy for Aggressive Growth originally appeared on usnews.com
