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), Nvidia Corp. (NVDA), and PayPal Holdings Inc. (PYPL), 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 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.

Key Takeaways

  • Growth stocks outperformed the broader market over the past year.
  • The ETFs with the best 1-year trailing total return are OGIG, PTH, and PTF.
  • The top holdings of these ETFs are Alibaba Group Holding Ltd. Sponsored ADRs, Amedisys Inc., and Five9 Inc., respectively.

There are 77 distinct growth ETFs that trade in the U.S., excluding inverse and leveraged ETFs, as well as funds with less than $50 million in assets under management (AUM). Growth stocks, as measured by the S&P 500 Growth Index, have outperformed the broader market with a total return of 31.1% over the past 12 months compared to the S&P 500's total return of 14.0%, as of November 4, 2020. The best-performing growth ETF, based on performance over the past year, is the O'Shares Global Internet Giants ETF (OGIG). We examine the top 3 best growth ETFs below. All numbers below are as of November 5, 2020.

O'Shares Global Internet Giants ETF (OGIG)

  • Performance over 1-Year: 101.0%
  • Expense Ratio: 0.48%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 221,773
  • Assets Under Management: $487.0 million
  • Inception Date: June 5, 2018
  • Issuer: O'Shares

OGIG tracks the O'Shares Global Internet Giants Index, which is comprised of global Internet technology and e-commerce equities that exhibit the potential for quality and growth. The ETF is focused on large-cap growth stocks across developed markets, but is heavily weighted to U.S. equities, which receive a 61% allocation within the portfolio. The next biggest country weighting is China, with a 22% allocation. The fund's top three holdings include Sponsored ADRs of Alibaba Group Holding Ltd. (BABA), a China-based e-commerce and internet infrastructure company; Amazon.com Inc. (AMZN), a multinational e-commerce and cloud computing company; and Tencent Holdings Ltd. (700:HKG), a China-based multinational technology conglomerate offering e-commerce and other Internet-related services and products.

Invesco DWA Healthcare Momentum ETF (PTH)

  • Performance over 1-Year: 85.6%
  • Expense Ratio: 0.60%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 47,985
  • Assets Under Management: $552.7 million
  • Inception Date: October 12, 2006
  • Issuer: Invesco

PTH tracks the Dynamic Healthcare Sector Intellidex Index, which is comprised of U.S. healthcare stocks that meet a set of investment merit criteria, including fundamental growth, stock valuation, investment timeliness, and risk factors. The ETF focuses on U.S. healthcare growth stocks across the market-cap spectrum. Nearly 25% of the fund is allocated to the biotechnology sector, followed by a 23% weighting for the healthcare equipment and supplies sector. The fund is probably best utilized as part of a short-term or sector-rotation strategy, and may be too targeted as part of a long-term portfolio. The fund's top three holdings include Amedisys Inc. (AMED), a provider of alternate-site healthcare services; Danaher Corp. (DHR), a manufacturer of medical, industrial, and commercial products; and Thermo Fisher Scientific Inc. (TMO), a manufacturer of scientific instruments, consumables, and chemicals.

Invesco DWA Technology Momentum ETF (PTF)

  • Performance over 1-Year: 66.2%
  • Expense Ratio: 0.60%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 22,773
  • Assets Under Management: $253.7 million
  • Inception Date: October 12, 2006
  • Issuer: Invesco

PTF tracks the Dynamic Technology Sector Intellidex Index, which is comprised of technology stocks that meet a set of investment merit criteria, including fundamental growth, stock valuation, investment timeliness, and risk factors. The ETF invests in U.S. growth tech stocks of various market capitalizations. Over half of the fund (52%) is allocated to software while the semiconductors and semiconductor equipment sector receives the next biggest allocation, at 22%. Its top three holdings include Five9 Inc. (FIVN), a provider of cloud software for contact centers; Apple Inc. (AAPL), a multinational technology company that manufactures smartphones, tablets, computers, and offers related software and services; and Nvidia, a provider of graphics processors and related software.

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