If you’re looking to generate big returns from the market, there’s little doubt that growth stocks are what you’ll want to have in your portfolio. Businesses which are reinvesting in their operations and which are generating strong revenue growth can make for ideal long-term investments.
However, picking the best growth stocks isn’t always easy. And what if you want to have a position in several of them? Keeping on top of many investments may not be practical and easy. Here’s where exchange-traded funds (ETFs) come since they can drastically simplify the process for you.
Two growth-focused ETFs which have doubled in value in the past five years are the iShares Russell 1000 Growth ETF (IWF 0.15%) and the Schwab U.S. Large-Cap Growth ETF (SCHG 0.24%). As well as they’ve performed in recent years, here’s why they can still make excellent investments to put into your portfolio today.
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iShares Russell 1000 Growth ETF
The iShares Russell 1000 Growth ETF holds a portfolio of both large- and mid-cap stocks that have the potential to generate above-average growth. There are just under 400 holdings in the fund, giving investors a wide range of diversification through this investment. The ETF charges an expense ratio of 0.19%, which isn’t too expensive for the quality stocks that investors get with this fund.
Tech stocks, and consumer discretionary and communication stocks account for the vast majority of the holdings, making up 77% of the fund’s overall weight. Investors will gain exposure to heavy hitters such as Apple, Nvidia, Amazon, and many other top growth stocks.
There’s room for the ETF to continue soaring as the spending on artificial intelligence (AI) remains feverish and can continue to help bolster the growth prospects for many of these tech companies. These are businesses which are on the cutting edge of the latest and greatest technologies, making them the types of companies it makes sense to invest in if you’re a growth investor. While they may encounter volatility in the short term, over the long haul, they are likely to rise in value, which is why the iShares Russel 1000 Growth ETF can be a great investment to simply buy and hold in your portfolio and forget about.
Schwab U.S. Large-Cap Growth ETF
Another option for investors is the Schwab U.S. Large-Cap Growth ETF, which as the name implies, also targets top growth stocks. But with this fund, the focus is on large-cap stocks, and there are fewer holdings — around 230. The ETF’s expense ratio is just 0.04%, making it an even cheaper option than the iShares fund.
There is a lot of overlap with the iShares fund, and the top sectors here are also businesses involved in tech, consumer discretionary, and communication sectors. But by having a slightly more concentrated portfolio, the fund has been able to outperform the iShares Russell ETF over the past five years.
And just like the iShares fund, similar catalysts could ensure that the stocks the Schwab ETF holds may continue to do well and rise higher in the future. The key differentiator is that with a bit more of a focus on tech (tech stocks account for 49% of the Schwab portfolio versus 47% in the iShares fund), this ETF may be more appealing to investors who want to prioritize that particular sector.
Both funds are fairly similar and can be good options for long-term investors to consider. They have already amassed some impressive gains over the past five years, and with a lot more growth still on the horizon for the stocks they have positions in, holding either one of these ETFs in your portfolio can be a great move for the long term.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, and Nvidia. The Motley Fool has a disclosure policy.
