Though there remains a small corner on Wall Street that continues to be bearish about the stock market, the fact remains that equity markets haven’t slowed. The S&P 500 (.SPX) crossed the 3,000 mark once more recently, thanks in large part to a pretty good earnings season for corporate America.
Sure, there are a few struggling stocks, but those that put up good sales and profits continue to see their share prices soar.
Growth investors who prioritize these fundamentals have been well-served in 2019, and there's a good chance that these stocks will continue to expand – and deliver continued gains to shareholders – in 2020 and beyond.
Here are nine exchange-traded funds that easily wrap up some of the best growth stocks.
Schwab U.S. Large-Cap Growth ETF
Schwab’s growth-oriented SCHG fund has rock-bottom 0.04% annual expenses, or just $4 annually in management fees on every $10,000 invested. The fund is admittedly just a vanilla index fund, with a simple screen for growth characteristics and a market-cap weighting that biases toward mega-cap technology stocks like Apple (AAPL) and Microsoft Corp. (MSFT). However, the 365 holdings that include these big tech names have collectively done quite well and delivered impressive 14% gains since Jan. 1 – beating the broader S&P 500 index thanks to its focus on growth.
Vanguard Small Cap Growth ETF
Bigger isn't always better if you really want growth. That's because while some of these large tech stocks undoubtedly offer scale, the truth is that their fastest growth is in the rearview mirror now that they are pushing $1 trillion in market value. If you're an investor really seeking growth, consider getting in on the ground floor with this Vanguard small-cap fund comprised of more than 620 smaller-sized U.S. stocks, all of which have growth characteristics. That means names like barcode technology firm Zebra Technologies Corp. (ZBRA) and health care supply stock West Pharmaceutical Services (WST) instead of larger names you may recognize but which have already reached maturity.
SPDR S&P 400 Mid Cap Growth ETF
For investors looking to split the difference, this SPDR fund focuses on mid-sized corporations by applying growth screening methodology to the S&P 400 (.IDX). If you're unfamiliar, that's the middle slice of the top 1,500 U.S. corporations – with the S&P 500 index representing the large-cap companies, the 400 index representing the next 400 and the 600 index representing the bottom tier. Some of these names are relatively unknown to investors, such as California-based GPS and logistics specialist Trimble (TRMB) while others like Domino's Pizza (DPZ) will be more recognizable. That's a nice way to get smaller and "growthy" without relying on risky and unproven names.
Janus Henderson Small Cap Growth Alpha ETF
If you want to get more sophisticated in how you chase growth stocks, this tactical fund from Janus uses proprietary screening techniques to look for smaller companies that can grow significantly and sustainably over the long term. The result is a more focused list of only about 200 small-cap names, with top holdings including software firm Ubiquiti (UI) that may not be on your radar at all. But given that UI stock is up about 50% in the last year, investors may want to rely on the expertise of this ETF to uncover outperformers.
SoFi Select 500 ETF
You may not recognize SoFi, a financial technology firm that is looking to democratize investing and lending through low-cost digital offerings meant to compete with traditional companies. And even if you do, you may not have heard of this fund that launched back in April. However, with a unique structure that makes the fund free to invest in (at least for the first year) it is worth considering. The boutique fund is comprised of mostly the same 500 components as your typical large-cap fund, however the weightings of those funds are formulated based on analysis of key growth characteristics. That means the fund is theoretically putting more of your investment behind the ones with the best growth potential.
Pacer U.S. Cash Cows Growth ETF
Another fund provider that isn't as well known, Pacer specializes in tactical funds that aren't the run-of-the-mill offerings. A great example is its "cash cows" funds, which seek stocks with the biggest rate of free cash flow. The fund is new, with an inception date of May 2, however the approach is very interesting since free cash flow is perhaps the best measure of a firm's growth potential. This metric is the cash left over after paying all expenses, taxes and other obligations and represents its "dry powder" to deploy as a tool for mergers, investment or even dividends and buybacks. Organizations without ready cash tend to stagnate, so growth investors may be well-served with a look at this ETF.
First Trust Multi Cap Growth AlphaDEX Fund
Another tactical fund, this First Trust ETF has a much longer market history. It was launched in 2007 and is designed to track growth stocks regardless of their size. As expected in a growth fund, there's a healthy bias toward the tech sector with about 19% of the portfolio in stocks like Microsoft and Texas Instruments (TXN) as well as smaller tech firms. But there's also a healthy dose of industrials including trucking stock Old Dominion Freight Line (ODFL) and automotive player Copart (CPRT). And with an equal weight methodology where positions are regularly rebalanced, no single stock in the 675 holdings represents a significantly greater portion than another.
iShares MSCI EAFE Growth ETF
It's worth noting that there are a host of fast-growing stocks that are not headquartered in the United States. That's where this iShares fund comes in, with its EAFE focus – that is, Europe, Australasia and the Far East – to include developed market stocks like Germany tech powerhouse SAP (SAP) as well as emerging market offerings like Hong Kong financial stock AIA Group. If you already own U.S. large-cap tech stocks in a standard index fund, this is a really interesting way to add growth and diversification to your portfolio.
Invesco DWA Developed Markets Momentum ETF
Perhaps the most sophisticated of all is this Invesco fund that takes an international approach, screens for growth and momentum factors and then selects a focused list of 100 corporations that aims to capture the very best growth stocks in the world. The result is an eclectic list that includes Australia's Ramsay Health Care Limited (RMSTF) and Canada's Constellation Software (CSU). The fund rarely dabbles in small-sized international stocks and sticks to large caps and mid caps, but its proprietary methodology ensures you're going to get more than the ordinary names.