It may seem premature to think about profits and growth potential as economic data trickles in that shows a lot of challenges stemming from illness and an economic slowdown. However, hard times never last forever – and over the long run, stock markets have a history of rebounding and moving higher. That's particularly true for stocks that have big growth potential, such as smaller firms in health care or technology. If you're taking a long view and interested in growth right now despite the obvious market volatility, here are seven exchange-traded funds to consider.
iShares Russell 1000 Growth ETF
If you're looking for a simple growth-oriented index fund, then consider this iShares (IWF) offering that takes the top 1,000 U.S. stocks by market capitalization and then deploys growth screens to identify and invest in companies that score in the top half of that list and ignore the other 500 or so. The result is a portfolio of popular names like Microsoft Corp. (MSFT) and Apple (AAPL), with about 40% of assets in information technology and effectively zero in low-growth sectors like materials and energy.
Invesco QQQ ET
Taking that approach a step further is the popular QQQ fund (QQQ), one of the top five exchange-traded products on U.S. market with nearly $100 billion in assets under management. It focuses on the 100 largest Nasdaq-listed equities, so unsurprisingly has about half its portfolio in tech stocks and another 20% or so in communications firms that are closely related. The bias means more eggs in fewer baskets, but these are certainly more growth-oriented sectors based on past stock market trends.
Vanguard Information Technology ETF
Of course, why just limit yourself to 100 Nasdaq stocks, half of which are tech, when you can get broader access to this high-growth sector via (VGT)? With a footprint that spans more than 300 of the top tech names on Wall Street as well as smaller firms like hardware firm Cypress Semiconductor and cloud storage firm Box (BOX), this nearly $25 billion fund offers a more pure-play approach to the sector.
Health Care Select Sector SPDR Fund
While many investors love technology as their go-to growth option, historical returns show that the sector that can provide the most reliable long-term returns is health care. That's because there is a rich history of innovation in the sector in the form of new products and treatments, as well as the harsh reality that U.S. health care spending marches ever higher year-after-year like clockwork. As the largest health care ETF by assets with about $24 billion in assets, (XLV) is the prime way to play that growth trend.
Vanguard Small-Cap ETF
An opposite approach to chasing mega-cap technology or health care stocks is to focus on the up-and-coming names on Wall Street. That's the strategy of this small-cap fund (VB), giving investors a position in more than 1,300 companies with much bigger long-term growth potential since they are starting from a much more modest position. There's risk here, of course, as small companies don't have the financing or investor confidence that Silicon Valley giants do. But growth-hungry investors may be willing to take on that risk in pursuit of greater reward.
SPDR S&P MIDCAP 400 ETF Trust
Taking a Goldilocks approach that is not too big and not too small, (MDY) carves out the S&P 400 – that is, out of the top 1,500 companies on U.S. markets, it focuses on the middle 400 stocks and excludes 500 at the top (which comprise the well-known S&P 500) and the smaller 600 stocks at the bottom. This is a great way to tap into growth trends of smaller firms like semiconductor testing firm Teradyne (TER) that may not be represented in your typical large-cap stock fund.
Vanguard Dividend Appreciation ETF
A different way of thinking about growth is to focus on stocks that are growing their payout to shareholders in addition to seeing expansion of overall revenue and profits. That's the strategy of (VIG), which offers a convenient way to track the performance of stocks of companies with a record of growing their dividends each year. That allows for stocks like Procter & Gamble Co. (PG) to make this fund, which may not be as well-known for innovation, a respected name among investors for its income potential.
|For more news you can use to help guide your financial life, visit our Insights page.|