Have you ever felt disheartened by the classic saying “you need money to make money”? It’s a sentiment many can relate to – acknowledging the premise that no matter how astute you are at picking stocks, your profits are ultimately delimited by the capital you have in play. When starting with a modest sum, it becomes challenging to acquire a substantial quantity of shares in any single company while also constructing a well-rounded investment portfolio.
Fortunately, there exists a remedy to this predicament: simply invest in a single exchange-traded fund (ETF) that encompasses all the growth stocks you desire to possess regardless. You can own any portion of a specific ETF proportional to your financial capacity. Furthermore, you can effortlessly augment this investment as additional funds become accessible.
The Superiority of the iShares Russell 1000 Growth ETF
Several larger and more renowned growth-oriented exchange-traded funds exist. For instance, the Vanguard Growth ETF boasts $136 billion in total assets. While not precisely a growth ETF, the Invesco QQQ Trust could be viewed as one, considering it holds most of the market’s premier growth stocks.
Nevertheless, for the average long-term investor seeking to sidestep excessive volatility, the iShares Russell 1000 Growth ETF stands out for a couple of crucial reasons.
The essence of the Russell 1000 Growth fund lies in mirroring the collective performance of all growth stocks within the top 1,000 companies on the U.S. stock market. Presently, nearly 400 stocks are eligible to be among the ETF’s market cap-weighted holdings.
This unique feature distinguishes the fund. While the iShares fund shares a similar top-heavy nature with the QQQ Trust and Vanguard Growth ETF (courtesy of exceptional performances from entities like Microsoft, Apple, and Nvidia), the rest of its $97 billion portfolio is notably balanced and reflective of the overall market.
For context, the 10th-largest holding in the iShares ETF – Tesla – constitutes roughly 2.5% of the fund’s total value, whereas Vanguard’s 10th-largest holding only makes up 1.6% of its portfolio. This difference widens as you move away from the largest holdings and towards the smaller ones. Notably, the iShares Russell 1000 Growth ETF also includes NYSE-listed pharmaceutical company Eli Lilly as a top-10 position, a company absent in the Invesco QQQ Trust.
Perhaps the most compelling reason to invest in the iShares growth fund, particularly if you are commencing with a relatively minimal sum, is that it provides exposure to an underappreciated segment of the market that you probably didn’t even realize you desired: mid-cap stocks.
Although the majority of the ETF’s value stems from the large caps in its portfolio, the Russell 1000 Growth fund also encompasses several stocks absent in the S&P 500 large-cap index.
This factor carries significant weight. Historically, the S&P 400 Mid-Cap Index has outperformed large caps, with the S&P 400 Mid-Cap Growth Index exhibiting even more remarkable performance.
Why is this the case? Primarily because most mid-cap stocks find themselves in the sweet spot of their lifecycle – past the turbulent early years of establishment but before their sheer size hampers growth potential.
Moreover, it is crucial to note that the Russell 1000 Growth ETF’s expense ratio is a modest 0.19%. Thus, investing and holding onto this fund for the long term will not severely impede your net returns.
Streamlined, reliable, and stress-free
While this specific ETF is not the exclusive growth-oriented option available, both of the other funds mentioned serve as excellent growth investments, alongside numerous other alternatives. There is no harm in owning multiple ETFs either.
For long-term growth investors embarking with a limited sum or desiring a straightforward investment that can be gradually added to, the iShares Russell 1000 Growth ETF emerges as a commendable and low-maintenance choice.
Contemplating a $1,000 Investment in the iShares Trust – iShares Russell 1000 Growth ETF
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