Forget value, go for growth here.
Sometimes it pays to throw value out the window, and throw a few growth stocks into your portfolio. Investors in the likes of Amazon.com (Nasdaq: AMZN) and Netflix (NFLX) will be happy to tell you that triple-digit price-earnings ratios don’t keep stocks from heading higher. But for every Amazon, there’s a Fitbit (FIT) or GoPro (GPRO) whose growth possibilities never develop into reality, delivering stark losses as a result. If you want to harness the power of growth stocks while minimizing the downside impact of single-stock implosions, consider one or more of these growth ETFs.
iShares Russell 1000 Growth ETF (IWF)
The IWF is one of the most basic and relatively low-risk growth ETFs out there. This fund invests in 552 members of the Russell 1000 — a primarily large-cap index that represents more than 90 percent of America’s stock market capitalization — that are expected to grow earnings more quickly than the broader market. Sure, there’s some single-stock risk at the top — Apple (AAPL) is weighted at more than 7 percent, while Alphabet (GOOGL, GOOG) and Microsoft Corp. (MSFT) are close to 5 percent weights. But IWF is a heavily blue-chip fund, so while it chases growth, it also is anchored by several bulletproof balance sheets.
Expenses: 0.2 percent, or $20 annually per $10,000 invested.
iShares Russell 2000 Growth ETF (IWO)
The old adage goes that it’s much easier to double $1 million in revenues than it is to double $1 billion. Thus, while some blue-chip large caps may have a little growth ramp left, you can expect far more out of smaller-cap stocks. The IWO invests in 1,159 stocks from the Russell 2000 small-cap index expected to grow earnings faster than the market. Single-stock risk is small, with Kite Pharma (KITE) the top weight at just 0.9 percent. But watch out: Small-caps growth stocks like these often are the first to sell off when volatility and economic uncertainty rear their ugly heads.
Expenses: 0.24 percent
Guggenheim S&P 500 Pure Growth (RPG)
Guggenheim is one of several “smart-beta” funds looking to provide more precise growth exposure by looking past a single measurement. Instead, RPG identifies and weights stocks based on sales growth, earnings growth and price momentum, and excludes any stocks that would be considered a blend of both growth and value. The result is a smaller grouping of 116 stocks that’s heavy in information technology (32 percent) and consumer discretionary (20 percent), and the weighting methodology currently has Applied Materials (AMAT) and Nvidia Corp. (NVDA) atop the fund’s holdings at just less than 3 percent weights each.
Expenses: 0.35 percent
PowerShares DWA Momentum Portfolio (PDP)
Many ETFs take a fundamental approach to identifying growth stocks, but PowerShares’ PDP instead selects its holdings based on relative strength, aka better price performance. It selects 100 holdings from a universe of top-1,000-ranked stocks based on market capitalization from the Nasdaq US Benchmark Index (which does include NYSE-listed stocks). Sector weights tend to fluctuate, and top holdings can come from just about anywhere — tech giant Apple is the top dog right now at 3.3 percent, and No. 3 is hot-running biotech Exelixis (EXEL). But sandwiched in between is American Tower Corp. (AMT), a telecom-infrastructure real estate investment trust.
Expenses: 0.63 percent
PowerShares QQQ Trust (QQQ)
PowerShares’ QQQ is a bizarre but effective hybrid that’s part broad index, part tech fund. The QQQ invests in the Nasdaq 100, which includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq exchange. The result is a wildly lopsided fund that’s weighted nearly 60 percent in technology, including the likes of Apple (12.5 percent), Alphabet (8.9 percent) and Microsoft (8.3 percent). However, you also get meaningful exposures to consumer discretionary (21.5 percent) and health care (11.6 percent), as well as low-single-digit holdings in consumer staples, industrials and telecom. While unorthodox, QQQ has outperformed the Standard & Poor’s 500 index on a total return basis across almost every significant time period.
Expenses: 0.2 percent
Vanguard Information Technology ETF (VGT)
Most growth funds tend to be heavy in technology. If you want to dive into this trend, then, you’d do well to consider Vanguard’s VGT — one of the largest tech-specific funds on the market. The VGT is a cap-weighted fund, which means familiar players such as AAPL, GOOGL and MSFT are up top, but its 364 holdings cover a wide swath of tech industries, including internet software, systems software, semiconductors and data processing. VGT also is one of the cheapest ways to invest in tech, at just 10 basis points.
Expenses: 0.1 percent
Amplify Online Retail ETF (IBUY)
Another way to jump into the technology sector is to invest in one of its budding industries — in this case, online retail. IBUY’s holdings admittedly straddle the fence of technology and consumer discretionary, depending on who’s defining the sector, but they all share a common factor: They have derived 70 percent or more of their revenues from online or virtual sales. IBUY uses a modified equal weight index that currently has Amazon outside the top 10; instead, IBUY is headed up by companies such as online used car platform Carvana Co. (CVNA), Stamps.com (STMP) and “artsy” peer-to-peer e-commerce website Etsy (ETSY).
Expenses: 0.65 percent
ARK Innovation ETF (ARKK)
ARK Invest is a boutique ETF provider that offers a few ETFs surrounding thematic trends including the internet, genomics and a new industrial revolution. The ARKK combines what ARK believes are the “cornerstone investment ideas” from those three areas, resulting in a basket of stocks heaviest in tech (38 percent) and health care (35 percent), with significant discretionary heft (13.5 percent) and a few other trace holdings. Tesla (TSLA), Amazon and medical record company Athenahealth (ATHN) are among ARKK’s top weights, but most notable at the moment is top holding Bitcoin Investment Trust, which tracks the price of cryptocurrency Bitcoin.
Expenses: 0.75 percent
SPDR S&P Biotech ETF (XBI)
Those who bought in following the massive biotech selloff of 2015 and early 2016 have been well rewarded, with several biotech ETFs up between 75 and 100 percent from their 2016 lows. Bluster from Congress and former presidential election favorite Hillary Clinton had many convinced price reform was on the way, but Wall Street increasingly became confident things would return to business as usual. XBI is a modified equal-weight index containing 99 biotech stocks at present, and that weighting allows smaller, potentially “growthier” stocks to have more of a say in the ETF’s performance. Top holdings include Kite Pharma, Exelixis and Juno Therapeutics (JUNO).
Expenses: 0.35 percent
Renaissance IPO ETF (IPO)
Some initial public offerings such as Facebook (FB) can be massive moneymakers, while others like GoPro can be financial widowmakers. Rather than bet the farm on any one IPO, consider buying the Renaissance IPO ETF, which buys some sizable IPOs soon after offering, and others during regular quarterly reviews. It caps them at 10 percent (at rebalancing), then releases them two years after their first day of trading. The portfolio consists of 44 stocks, including a big 12 percent weight in Ferrari NV (RACE), and 7-percent-plus weights in First Data Corp. (FDC) and TransUnion (TRU).
Expenses: 0.6 percent
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10 ETFs to Buy for Oodles of Growth originally appeared on usnews.com
