Growth ETFs (exchange-traded funds) are as simple as they sound: they are portfolios of growth stocks. However, not all funds are equal and investors should do their due diligence to find the best growth ETFs to meet their goals.
By definition, a growth stock is any company with an above-average growth profile. In other words, these are companies whose revenue and profits are growing faster than the market average. They also often pay little or no dividends (but not always, as you’ll read later), choosing instead to reinvest their cash flow into the business to maintain growth.
This is why it makes so much sense to own growth ETFs. By diversifying your holdings into growth stocks via a fund, you protect your downside risks.
Funds like these tend to be cheap and efficient vehicles that allow you to invest in dozens or even hundreds of funds. growth stocks without having to redeem them all individually in your account. They also allow you to be tactical, investing in sectors and industries that you think are best positioned for growth in the future.
Investors have dumped growth stocks in 2022 due to the rise interest rate and the threat of recession. However, this segment of the market has come back strong, in part due to market strength. Magnificent 7 actionsthe group of technology and artificial intelligence (AI) companies that includes Nvidia (NVDA) and Microsoft (MSFT).
Look to the future, relax inflation and more normalized interest rates “will likely provide upside earnings potential for growth stocks, particularly in the technology and communications services sectors,” says Jeff Buchbinder, chief equity strategist at LPL Financial. This could keep the tide in favor of growth.
With that in mind, here are six of the best growth ETFs to add to a core portfolio over the long term.
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