5 Ultra-Cheap Growth ETFs to Tap on Global Stimulus Hopes
After a bumpy ride in August due to escalation in the U.S.-China trade tariff war, Wall Street heaved a sigh of relief this month. This is primarily thanks to hopes of resumption in trade talks next month and monetary easing policies across the globe (read: 5 High-Beta ETFs to Buy on Trade Talk Hopes).
China’s central bank last week cut its reserve requirements for the seventh time since the start of 2018, reducing the amount of cash that banks are mandated to keep in reserve and thereby freeing up as much as 900 billion yuan ($126 billion) in liquidity. The bank has cut the reserve requirement ratio (RRR) by 50 bps for all banks, with an additional 100 bps cut for qualified city commercial banks. The RRR for large banks will be lowered to 13.0%.
The European Central Bank (ECB) is also expected to deploy further stimulus to shore up the 19-member eurozone economy, citing persistent low inflation and sluggish growth. Market participants are betting that the ECB will cut its interest rate on bank overnight deposits for the first time since 2016, when it meets on Sep 12. Meanwhile, the Federal Reserve is also expected to cut interest rates later this month. Market expectations of a 25 basis-point rate cut are at 91.2%, according the CME Group’s FedWatch tool (read: Europe ETFs Likely to Gain From Low Rates After Draghi's Tenure).
Hopes of rounds of global easing policies are instilling strong confidence in the stock market, returning investors’ risk appetite. Against this backdrop, nothing seems a better strategy than growth. This is especially true, as growth stocks refer to high-quality stocks that are likely to witness revenue and earnings growth at a faster rate than the industry average. These stocks harness their momentum in earnings to create a positive bias in the market, resulting in rocketing share prices. As such, growth stocks tend to outperform during an uptrend.
However, it is worth noting that these funds offer exposure to stocks with growth characteristics that have comparatively higher P/B, P/S and P/E ratios and exhibit a greater degree of volatility when compared to value stocks.
Growth ETFs in Focus
While there are plenty of options in the growth ETF world, we have highlighted five funds from the category that that offer broad-based exposure to the U.S. stock market. All these funds have a solid Zacks ETF Rank #1 (Strong Buy) or 2 (Buy) with a lower expense ratio of under 10%, making them superior, relative to other choices in the growth space (read: 5 Low-Cost ETFs to Buy as Every Penny Counts).
Vanguard Growth ETF VUG
This ETF follows the CRSP US Large Cap Growth Index, holding 297 stocks in its basket with none accounting for more than 8.1% share. Technology and consumer services are the top two sectors with 36.1% and 20.3% share, respectively. The fund has AUM of $42.4 billion and average daily volume of 690,000 shares. It charges 4 bps in fees per year and has returned about 26.7% so far this year. VUG has a Zacks ETF Rank #1.
Schwab U.S. Large-Cap Growth ETF SCHG
With AUM of $8.2 billion, SCHG follows the Dow Jones U.S. Large-Cap Growth Total Stock Market Index. It holds 414 stocks in its basket with large concentration on the top three firms. From a sector look, information technology takes the top spot at 28.8% share while health care, consumer discretionary and communication services also get a double-digit exposure each in the portfolio. It charges 4 bps in annual fees and saw average volume of around 494,000 shares a day. The ETF has gained 24.3% year to date and has a Zacks ETF Rank #2 (read: ETFs to Grab Amid Increased Odds for Fed Rate Cut).
iShares Core S&P U.S. Growth ETF IUSG
This product tracks the S&P 900 Growth Index and is home to 540 stocks with a slight tilt toward the top two firms. Here again, information technology is the top sector accounting for 26.4% of the portfolio while healthcare, communication and consumer discretionary industrials get double-digit exposure each. The fund has accumulated $6.8 billion in its asset base and trades in solid volume of 563,000 shares a day on average. It has 0.04% in expense ratio and is up 22.3% in the year-to-date time frame. IUSG has a Zacks ETF Rank #1.
SPDR S&P 500 Growth ETF SPYG
This product follows the S&P 500 Growth Index, holding 295 stocks in its basket with concentration on the top firm. SPYG is heavy on the information technology sector with 27% allocation, while healthcare, communication services, and consumer discretionary round off the next three. The product has amassed $5.5 billion in its asset base and charges investors 4 bps in annual fees. Volume is good exchanging about 1.4 million shares a day on average. The ETF has gained 22.5% so far this year and has a Zacks ETF Rank #1 (read: Japan-US Deal in September: ETFs to Shine).
Vanguard Mega Cap Growth ETF MGK
With AUM of $4.5 billion, this ETF tracks the CRSP US Mega Cap Growth Index. It holds 124 securities in its basket with none accounting for more than 9.7% of the total assets. It has key holdings in technology, consumer services, financials and industrials that account for double-digit exposure each. It charges 7 basis points in annual fees and trades in good volume of around 158,000 shares a day on average. The fund has gained 26.3% in the year-to-date timeframe and sports a Zacks ETF Rank #1.
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iShares Core S&P U.S. Growth ETF (IUSG): ETF Research Reports
Vanguard Growth ETF (VUG): ETF Research Reports
Vanguard Mega Cap Growth ETF (MGK): ETF Research Reports
SPDR Portfolio S&P 500 Growth ETF (SPYG): ETF Research Reports
Schwab U.S. Large-Cap Growth ETF (SCHG): ETF Research Reports
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