Growth ETFs, or exchange-traded funds, are investment portfolios that consist of growth stocks. These are companies with above-average growth profiles, meaning their revenue and earnings are expanding faster than the market average. These companies typically reinvest their cash flow back into the business rather than paying dividends.
Investing in growth ETFs is a smart way to diversify your holdings and protect against downside risk. These funds are cost-effective and efficient, allowing investors to access a wide range of growth stocks without having to trade them individually. They also provide the flexibility to strategically invest in sectors and industries that are poised for growth.
In 2022, growth stocks saw a resurgence after being shunned by investors due to concerns about higher interest rates and a potential recession. The tech and artificial intelligence sectors, including companies like Nvidia and Microsoft, led the way in this comeback. Looking ahead, experts predict that easing inflation and normalized interest rates will continue to support growth stocks, particularly in the technology and communication services sectors.
For investors looking to add growth ETFs to their portfolio for the long term, here are six top picks to consider. These funds offer exposure to a diverse range of growth stocks and can help investors capitalize on the potential upside in earnings in the coming years.