Exchange-traded funds (ETFs) offer a straightforward and cost-effective investment strategy by allowing diversification through a single purchase. ETFs are baskets of securities traded on exchanges, with prices fluctuating throughout the trading day, unlike mutual funds which are priced once daily after market close. They also tend to be more tax-efficient compared to actively managed mutual funds, as they typically generate fewer capital gain distributions.

According to BlackRock, assets held in US-listed ETFs have seen significant growth in the past five years. As of Q1 2024, ETFs accounted for 13% of equity and 2.8% of fixed-income assets in the US, up from 10.3% and 2%, respectively, in 2019. PwC forecasts that global ETF assets under management will surpass USD 19.2 trillion by June 2028, reflecting a compound annual growth rate (CAGR) of 13.5% over five years.

Against this backdrop, this article explores the popularity of US growth ETFs, which focus on investing in rapidly expanding yet often volatile companies to seek above-average returns.

Schwab U.S. Large-Cap Growth ETF

Investors looking for exposure to large-cap US growth stocks may find the Schwab ETF appealing. It closely tracks the performance of the Dow Jones U.S. Large-Cap Growth Total Stock Market Index and boasts a low expense ratio of just 0.040%.

As of June 26, 2024, top holdings include tech giants such as Microsoft, NVIDIA, Apple, Amazon, and Meta Platforms, reflecting a significant allocation towards the information technology sector. This sector makes up for 46.08% of the fund (as of March 31, 2024). It has the second-highest allocation in the communication services sector (13.04%).

As of May 31, 2024, the fund has delivered an annualized return (in terms of NAV) of approximately 35.21% over the last year, 11.78% over the past three years, and 20.10% over the past five years, closely tracking its benchmark's performance.

Data Source: Schwab Asset Management Website; Image Source: © 2024 Krish Capital Pty.Ltd

Data Source: Schwab Asset Management Website; Image Source: © 2024 Krish Capital Pty.Ltd

SPDR® Portfolio S&P 500® Growth ETF

The SPDR® Portfolio S&P 500® Growth ETF tracks the performance of the S&P® 500 Growth Index, offering exposure to S&P 500 companies with growth potential. The index selects stocks based on metrics such as sales growth, earnings change to price ratio, and momentum.

Top holdings as of June 25, 2024, include Microsoft, NVIDIA, Apple, Amazon, and Meta Platforms. The fund has provided a return (in terms of NAV) of around 31.71% in the last year, 8.92% in the past three years, and 16.63% in the past five years, as of May 31, 2024.  

Data Source: State Street Global Advisors Website; Image Source: © 2024 Krish Capital Pty.Ltd

Data Source: State Street Global Advisors Website; Image Source: © 2024 Krish Capital Pty.Ltd

Vanguard Growth ETF

The Vanguard Growth ETF (VUG) aims to replicate the CRSP US Large Cap Growth Index, offering a straightforward means to mirror the performance of prominent U.S. growth stocks. Employing a passive management strategy, the fund fully replicates the index, aligning its holdings closely with those of the benchmark it tracks.

Technology stocks dominate its holdings, comprising 64.06%, with top holdings including Microsoft, Apple, NVIDIA, Amazon, and Facebook. As of May 31, 2024, the ETF has shown average returns in terms of NAV of approximately 33.29% over the past year, 9.70% over the last three years, and 18.83% over the past five years.

Data Source: Vanguard Website; Image Source: © 2024 Krish Capital Pty.Ltd

 

Data Source: EODHD/Others as of June 27, 2024; Image Source: © 2024 Krish Capital Pty.Ltd

Vanguard Russell 1000 Growth ETF

The Vanguard Russell 1000 Growth ETF (VONG) focuses on investing in stocks within the Russell 1000 Growth Index, which comprises a broad spectrum of growth-oriented stocks from large US companies. Its primary objective is to closely replicate the index’s performance, serving as a benchmark for returns in the large-cap growth segment of the U.S. stock market. Due to its concentrated exposure to growth stocks, the fund offers substantial potential for investment growth, characterized by higher volatility compared to bond-focused funds.

As of May 31, 2024, the ETF's portfolio is heavily weighted towards the technology sector, constituting 61.34% of its holdings, followed by the consumer discretionary sector at 18.10%. Its top five holdings include industry giants such as Microsoft, Apple, NVIDIA, Amazon, and Facebook. As of May 31, 2024, the ETF has demonstrated noteworthy average annual returns in terms of NAV: approximately 33.29% over the past year, around 9.70% over the last three years, and about 18.83% over the past five years. 

Data Source: Vanguard Website; Image Source: © 2024 Krish Capital Pty.Ltd

Data Source: EODHD/Others as of June 27, 2024; Image Source: © 2024 Krish Capital Pty.Ltd

To wrap up, ETFs offer a compelling investment option due to their simplicity, cost-effectiveness, and ability to provide diversified exposure through single purchases. However, investors should conduct thorough research or consult with financial advisors before making investment decisions as past performance does not guarantee future results, and investment values may fluctuate.