The Best Growth ETFs to Buy

Summary: The best growth ETFs to buy are those that hold companies expected to grow faster than peers based on one or more fundamental measures, including earnings per share and return on equity. Growth ETFs tend to have outsize exposure to stocks in the technology, communication services and consumer discretionary sectors. Seek out large-cap growth ETFs with low costs and high liquidity.

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 December 12.