Growth exchange-traded funds (ETFs) are one of two broad categories of ETFs, the other one being value ETFs. Growth ETFs are designed to invest in a basket of stocks whose underlying companies have the potential for rapid growth, as opposed to stocks whose prices are relatively undervalued. Growth companies in these funds include Microsoft Corp. (MSFT), Intel Corp. (INTC), Cisco Systems Inc. (CSCO), and Salesforce.com Inc. (CRM), among others. While these ETFs can provide above average returns, they also carry more risk because fast growth tends to be accompanied by higher volatility, especially during times of economic weakness. These ETFs may also not be the best vehicles for investors looking for regular investment income. That's because many growth companies reinvest their earnings into future growth instead of paying dividends to their shareholders. That being said, the benchmark iShares S&P 500 Growth ETF (IVW) has far outperformed the broader market in the past year, with 1-year trailing total returns of 33.0% as compared with 19.9% for the S&P 500.

Key Takeaways

  • Growth ETFs dramatically outperformed the broader market in the past year.
  • The top ETFs based on 1-year trailing total returns are OGIG, PTH, and PSI.
  • The top holdings for these funds are Amazon.com Inc., Novavax Inc., and Advanced Micro Devices Inc., respectively.

The growth ETF universe is comprised of about 79 ETFs, excluding inverse and leveraged ETFs as well as those with under $50 million in assets under management (AUM). The best-performing growth ETF for Q4 2020 is the O'Shares Global Internet Giants ETF (OGIG). Below, we examine the top 3 growth ETFs as measured by 1-year trailing total returns. All data in this story are as of August 19, 2020.

O'Shares Global Internet Giants ETF (OGIG)

  • 1-Year Trailing Total Returns: 72.8%
  • Expense Ratio: 0.48%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 288,662
  • Assets Under Management: $386.0 million
  • Inception Date: June 5, 2018
  • Issuing Company: O'Shares

OGIG focuses on large-cap internet stocks from developed markets. The fund tracks the O'Shares Global Internet Giants Index, which selects stocks from among a pool of 2,500 companies in the internet technology and internet commerce categories. The fund's top holdings include Amazon.com Inc. (AMZN), the e-commerce titan; Alibaba Group Holding Ltd. (BABA), the Chinese e-commerce and technology giant; and Tencent Holdings Ltd. (700), a Chinese conglomerate and internet company.

Invesco DWA Healthcare Momentum ETF (PTH)

  • 1-Year Trailing Total Returns: 56.1%
  • Expense Ratio: 0.60%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 56,308
  • Assets Under Management: $561.4 million
  • Inception Date: October 12, 2006
  • Issuing Company: Invesco

PTH is a multi-cap fund targeting health care companies in the U.S. The fund tracks the Dynamic Healthcare Sector Intellidex Index, which uses quant-based filters to identify individual stocks. This may contribute to the potential for greater performance for PTH, but it also makes this fund more expensive for investors as compared with similar ETFs. The ETF's top holdings include Novavax Inc. (NVAX), the vaccine development company; West Pharmaceutical Services Inc. (WST), the maker of pharmaceutical packaging and delivery services; and Quidel Corp. (QDEL), the maker of diagnostic healthcare products.

Invesco Dynamic Semiconductors ETF (PSI)

  • 1-Year Trailing Total Returns: 45.6%
  • Expense Ratio: 0.58%
  • Annual Dividend Yield: 0.39%
  • 3-Month Average Daily Volume: 31,774
  • Assets Under Management: $295.9 million
  • Inception Date: June 23, 2005
  • Issuing Company: Invesco

PSI is a multi-cap fund targeting U.S.-based semiconductor stocks. The fund tracks the Dynamic Semiconductors Intellidex Index and holds primarily small and medium-cap stocks. The fund's top holdings include Advanced Micro Devices Inc. (AMD); NVIDIA Corp. (NVDA); and Qualcomm Inc. (QCOM), all of which are semiconductor companies.