Growth stocks have been a driving force in the current market, with many investors turning to growth-focused exchange-traded funds (ETFs) to capitalize on this trend. As market indices approach all-time highs, the notion of waiting for a pullback before investing can lead to missed opportunities. Historical data from J.P. Morgan reveals that new market highs occur approximately 7% of the time, and in nearly one-third of those instances, stock prices do not retreat. This suggests that erring on the side of caution might not be the best strategy.
Instead, adopting a consistent investment approach, known as dollar-cost averaging, can be a more effective way to build wealth over time. Regularly contributing funds, regardless of market conditions, allows investors to accumulate shares at varying prices, ultimately smoothing out the cost basis.
Currently, growth stocks, particularly those driven by advancements in artificial intelligence (AI), are poised for continued upward momentum. The AI sector, viewed as a transformative technology, is backed by some of the most financially robust tech companies, which differentiates this boom from previous cycles driven by the internet.
For those looking to invest $1,000, several ETFs offer substantial exposure to leading growth trends. It’s important to note that this amount is merely a starting point; ongoing monthly investments are encouraged.
The Invesco QQQ Trust is particularly noteworthy, tracking the Nasdaq 100 index, which comprises the 100 largest non-financial companies listed on the Nasdaq. This ETF has a significant tech focus, with over 60% of its assets allocated to technology companies. Over the past decade, Invesco QQQ has achieved a striking total return of over 490%, translating to an average annual increase of 19.7%, significantly outpacing the S&P 500.
Another strong contender is the Vanguard Growth ETF, which follows the CRSP US Large Cap Growth Index, representing the growth portion of the S&P 500. This ETF holds around 165 large-cap stocks and shows a clear emphasis on leading AI names. Over the past decade, it has delivered an annual return of 17.1%, and an impressive 25% over the past three years.
For investors seeking heightened exposure to the tech sector, the Vanguard Information Technology ETF is an excellent option. While it encompasses over 300 stocks, a significant portion—44%—is concentrated in three major companies: Nvidia, Microsoft, and Apple. This focus has resulted in a remarkable average annual return of 22% over the past decade and an even more impressive 26.8% in the last three years.
As the momentum around AI and technological advancements continues to influence the economy, incorporating these strategic ETFs could be essential for investors looking to build a robust portfolio in today’s growth-driven market.
