I’m always on the lookout for the best-quality exchange traded funds (ETFs) in the market, across a range of sectors. Of course, holding a significant amount of exposure to growth stocks, and related ETFs, is important for investors with decades of potential growth ahead of them. I’m in this bucket, so I’m actively looking to invest in top-tier (and low-cost) growth ETFs.
-
Vanguard Growth ETF (VUG), Vanguard Mega Cap Growth ETF (MGK), and iShares Russell 1000 Growth ETF (IWF) offer expense ratios of 0.03%, 0.05%, and 0.18% respectively, with VUG and MGK providing concentrated exposure to 150+ and 60-70 large-cap growth stocks while IWF spreads bets across nearly 400 growth names for less concentration risk.
-
Long-term investors are repositioning into low-cost growth ETFs during market pullbacks driven by geopolitical tensions, betting that mega-cap growth stocks and AI-related sectors will continue dominating equity returns.
-
The analyst who called NVIDIA in 2010 just named his top 10 AI stocks. Get them here FREE.
Right now, the following three such ETFs are atop my watch list. Here’s why I think these particular growth ETFs look attractive, and why long-term investors would do well to consider these names on any meaningful pullbacks (such as the one we’ve seen of late, with increasing tensions between the U.S., Israel and Iran).
READ: The analyst who called NVIDIA in 2010 just named his top 10 AI stocks
The Vanguard Growth ETF (VUG) is the kind of foundational long-term investment for those looking for top-shelf growth stocks. This ETF tracks the CRSP US Large Cap Growth Index, meaning VUG offers broad exposure to 150+ U.S. large-cap growth names at a rock-bottom 0.03% expense ratio. Indeed, that’s one of the cheapest options for investors looking for ways to own the market’s fastest-growing blue chips.
The fund is heavily tilted toward technology and communication services, with information technology alone at roughly 50% of assets. That said, this ETF also provides investors with solid exposure to companies in the communication services and consumer discretionary sectors as well. I think this ETF’s broad-based exposure, with a tilt toward larger-cap names, makes it more attainable or accessible for those looking to match the relative performance of the market with a bit more of a tilt toward long-term cash flow growth potential.
Now, this growth exposure comes at a cost. This ETF has an average price-earnings multiple around 40-times, which is expensive. The fund’s average price-book ratio also reflects the premium investors are willing to pay for superior earnings and revenue growth. That said, with assets under management north of 150 billion dollars, this is one of the deepest, most liquid vehicles in the growth universe. That’s ideal for both buy-and-hold investors and tacticians layering into weakness.
The Vanguard Mega Cap Growth ETF (MGK) is the laser-focused mega-cap growth vehicle for investors who want the market’s biggest secular winners doing the heavy lifting in their portfolio.
Tracking the CRSP US Mega Cap Growth Index, MGK is heavily-concentrated in roughly 60–70 of the largest U.S. growth stocks. That exposure is relatively simple to replicate, making this fund’s overall expense ratio of 0.05% make sense.
Now, I think many investors can generate a portfolio very similar to this fund with minimal effort. That said, given variances in stock prices, it may not be as easy to create such a portfolio and rebalance consistently to generate the kind of performance MGK can over the long-term. Thus, for those looking to add a bit more exposure to some of the largest (and fastest-growing) companies in the world, this is an excellent option to consider.
I think it’s important to reflect on the fact that this ETF’s valuation profile is unsurprisingly rich, with a price-to-earnings ratio in the low-40s. That reflects the high-growth nature of its holdings and the market’s willingness to pay up for their cash flow and earnings visibility.
The core bull thesis here is simple. If you believe the mega-cap growth complex will continue to dominate equity market returns as AI, chips, and software eat the world, MGK is a direct play on that view. With more than 30 billion dollars in assets, tight bid-ask spreads, and an ultra-liquid underlying basket, this is an ETF I think most investors can own and sleep well at night doing so.
Finally, we have the iShares Russell 1000 Growth ETF (IWF). This broad-based ETF is a growth workhorse for investors who want diversified, large-cap growth exposure without giving up too much to fees or concentration risk. Tracking the Russell 1000 Growth Index, this ETF owns nearly 400 U.S. growth names across sectors. Importantly, this ETF also carries an expense ratio of 0.18% which is still competitive in the growth category, especially given its breadth. Unlike more top-heavy peers, IWF spreads its bets more widely across the growth spectrum. That’s all the while still leaning heavily into tech, consumer discretionary, and communication services.
In other words, investors gain exposure to some of the highest-growth sectors of the economy, while also seeing outsized exposure to smaller-cap names. While other ETFs are highly concentrated in the top-10 stocks in their portfolios (often ranked by market capitalization), this fund is far less concentrated among the leading mega-cap tech names. That can be a tailwind in markets where leadership broadens beyond the Magnificent 7. In terms of fundamentals, IWF trades at a price-to-earnings ratio in the mid-30s. That’s lighter than some high-octane growth peers, reflecting a mix of hyper-growth names and steadier compounders.
With assets exceeding 100 billion dollars and solid liquidity, I think growth investors looking for a truly broad allocation to growth stocks can’t go wrong owning this particular stock over the long-term.
Wall Street is pouring billions into AI, but most investors are buying the wrong stocks. The analyst who first identified NVIDIA as a buy back in 2010 — before its 28,000% run — has just pinpointed 10 new AI companies he believes could deliver outsized returns from here. One dominates a $100 billion equipment market. Another is solving the single biggest bottleneck holding back AI data centers. A third is a pure-play on an optical networking market set to quadruple. Most investors haven’t heard of half these names. Get the free list of all 10 stocks here.