In addition to segmenting by size, such as micro- and small-caps as well as mid-, large- and mega-caps, and the 11 sectors defined under the Global Industry Classification Standard (GICS), investors can also distinguish between two styles: value vs growth.
Value investing is associated with legendary investors like Benjamin Graham and Warren Buffett. The approach has deep academic roots thanks to Eugene Fama and Kenneth French, who studied the value factor.
But growth has dominated performance since the 2008-09 Great Financial Crisis. Even broad, core benchmarks like the S&P 500, designed to blend value and growth, lean heavily toward growth today.
Nowhere is this clearer than in the outsized role of technology stocks, representing more than 30% of the index. And then you have top-heavy composition driven by the so-called Magnificent 7 stocks, Alphabet (GOOGL), Amazon.com (AMZN), Apple (AAPL), Meta Platforms (META), Microsoft (MSFT), Nvidia (NVDA) and Tesla (TSLA).
For investors looking to double down on the growth style, options exist outside of broad market indices. Growth exchange-traded funds (ETFs) are one of the simplest ways to capture this factor tilt.
How do growth ETFs work?
Growth ETFs can be rules-based, tracking an index with objective criteria for screening and weighting stocks, or actively managed by analysts using research and models. In either case, the goal is to select companies expected to grow faster than peers based on one or more fundamental measures.
A common screen is historical or forecasted earnings per share (EPS) growth. It's popular because earnings growth often drives long-term stock performance. But it's not foolproof.
Backward-looking EPS may reflect cyclical booms rather than durable growth, while forward-looking EPS depends on analyst forecasts and company guidance that can prove optimistic.
Another frequently used metric is return on equity (ROE), which measures how effectively a company generates profit from shareholders' equity.
ROE is calculated by dividing net income by shareholder equity, and growth-oriented companies often sustain double-digit ROE, signaling strong profitability and efficient capital use.
Valuation also comes into play. Growth investors often look at the price-to-earnings growth (PEG) ratio, which adjusts the traditional P/E ratio by factoring in expected earnings growth.
A PEG around 1.0 is often considered reasonable – suggesting a stock is fairly priced for its growth rate – while much higher ratios may indicate overvaluation.
Growth vs value
The line between growth and momentum investing can blur. Some growth ETFs incorporate technical analysis, targeting stocks trading above moving averages or relative strength indicators.
The idea is that the "trend is your friend" and that investors should "let winners run."
Growth ETFs over the past decade have tended to share several characteristics:
- Heavy concentration of large-cap stocks and mega-cap stocks in the top holdings.
- Overweight to cyclical yet innovative sectors such as technology, consumer discretionary stocks and communication services stocks.
- Lower or nonexistent exposure to dividend-paying stocks and dividend yields, as many growth companies prefer reinvesting cash into expansion rather than paying shareholders.
These hold regardless of which method is used.
How we picked the best growth ETFs
The first step in narrowing down the universe of growth ETFs was deciding what to exclude. Actively managed growth funds were taken off the list. While some can beat their benchmarks in hindsight, the odds are stacked against doing so consistently.
S&P's SPIVA study shows that 96.29% of large-cap growth funds underperformed the S&P 500 Growth Index over a 15-year period. Much of this gap is explained by higher fees, which compound year after year and create a structural drag on performance.
We also limited our picks to large-cap growth ETFs. Academic research and investing experts including Larry Swedroe have described small-cap growth strategies as "a black hole." This is an anomaly, since the size factor typically implies stronger returns.
But small-cap growth stocks often combine the worst traits of both categories: limited profitability, stretched valuations and higher volatility without the historical return premium of small value.
From there, we applied three practical filters:
Fees. We set a maximum expense ratio of 0.20%. Growth funds are a highly competitive category in 2025, so there is little justification for paying higher fees.
Liquidity. We focused on ETFs with 30-day median bid-ask spreads of 0.1% or less. This ensures investors can trade efficiently without losing performance to transaction costs.
Assets under management. Finally, we required at least $1 billion in assets for economy of scale and investor trust.
Here are five of the best growth ETFs to consider for your portfolio.
Data is as of September 24.
- Assets under management: $62.88 billion
- Expense ratio: 0.15%
- 30-day median bid-ask spread: 0.01%
- 3-year annualized total return: 24.87%
The Invesco NASDAQ 100 ETF (QQQM) is the smaller, buy-and-hold counterpart to the Invesco QQQ Trust (QQQ).
It trades at a lower price per share and carries a 0.05% lower expense ratio, making it better suited for long-term investors rather than active traders, since it doesn’t offer the same robust options market as QQQ.
Both ETFs track the Nasdaq-100 Index, which consists of the 100 largest non-financial companies listed on the exchange and weights them by market capitalization with minor adjustments.
In practice, that results in a heavy tilt toward technology stocks, though the Nasdaq's history of attracting innovative listings means a notable presence of healthcare names, particularly in biotechnology.
Learn more about QQQM at the Invesco provider site.
- Assets under management: $186.61 billion
- Expense ratio: 0.04%
- 30-day median bid-ask spread: 0.02%
- 3-year annualized total return: 24.96%
The Vanguard Growth ETF (VUG) holds 190 stocks that make up the CRSP US Large Cap Growth Index. Unlike QQQM, it does not exclude financials, so investors gain exposure to names such as Visa (V) and Mastercard (MA).
The growth tilt is clear in its fundamentals, with an average return on equity of 33.4% and average earnings growth of 31.5%.
Still, valuations run high. On average, portfolio companies trade at 38.7 times earnings and 12 times book value.
The fund also has a pronounced technology bias, with just over 60% of assets in the sector. Nvidia and Microsoft alone account for nearly a quarter of the ETF's total weight.
Learn more about VUG at the Vanguard provider site.
- Assets under management: $121.12 billion
- Expense ratio: 0.18%
- 30-day median bid-ask spread: 0.02%
- 3-year annualized total return: 25.55%
Many older growth mutual funds use the Russell 1000 Growth Index as their benchmark to beat, making iShares Russell 1000 Growth ETF (IWF) a popular "buy the haystack" option for ETF investors.
The portfolio includes 390 companies, offering similar exposures and metrics as VUG but in a slightly more diversified format.
The familiar growth tilts remain. Technology stocks make up 52% of assets, and Nvidia and Microsoft together account for 24% of the ETF's weight. Still, performance has been strong.
IWF carries a five-star Morningstar rating, reflecting how it has historically outperformed most of the 1,031 large-cap growth funds on a risk-adjusted basis.
Learn more about IWF at the iShares provider site.
- Assets under management: $43.22 billion
- Expense ratio: 0.04%
- 30-day median bid-ask spread: 0.01%
- 3-year annualized total return: 22.35%
The same S&P 500 Growth Index that many active managers struggle to beat can be accessed at minimal cost through the SPDR Portfolio S&P 500 Growth ETF (SPYG).
SPYG elects the growth half of the S&P 500, resulting in 216 holdings best aligned with growth criteria. The fund projects an estimated 3- to 5-year EPS growth rate of 13.8%.
The familiar style tilts are present but less pronounced than in other growth ETFs. Nvidia and Microsoft together account for 20% of assets, while technology makes up 42% of the portfolio.
A modest 0.5% SEC yield also helps make SPYG a relatively tax-efficient option for taxable accounts.
Learn more about SPYG at the SPDR provider site.
- Assets under management: $50.26 billion
- Expense ratio: 0.04%
- 30-day median bid-ask spread: 0.02%
- 3-year annualized total return: 25.88%
The Schwab U.S. Large-Cap Growth ETF (SCHG) delivers broad growth exposure similar to IWF but at a much lower cost.
SCHG tracks the Dow Jones U.S. Large-Cap Growth Total Stock Market Index, which includes 197 holdings. On average, portfolio companies show a return on equity of 27.81%, reflecting strong profitability.
As with other growth ETFs, familiar tilts remain, though less extreme than in VUG or IWF. Nvidia and Microsoft together account for about 20% of the fund, while technology stocks make up just under half of assets.
Tax efficiency is also decent. Schwab estimates a three-year after-tax return of 21.49% compared with a 25.88% three-year NAV return.
Learn more about SCHG at the Schwab provider site.
