The growth factor is one of this year’s best-performing investment factors, a theme that is helping some growth exchange traded funds race to new records. That includes the SPDR S&P 500 Growth ETF (NYSEArca: SPYG).
The growth style, though, may be gaining momentum as investors turned to upbeat economic and earnings data, causing many to adopt a more risk-on attitude. Since growth stocks show high multiples, investors may expect that the companies will sustain a high growth rate. In contrast, traders may feel that firms with low multiples would continue to experience tepid growth.
SPYG, which hit another all-time high Monday, is up 14.6% year-to-date. The ETF tracks the S&P 500 Growth Index and is one of the oldest ETFs dedicated to the growth factor with its 17th birthday looming later this year.
SPYG’s underlying index “contains stocks that exhibit the strongest growth characteristics based on: sales growth, earnings change to price ratio, and momentum,” according to State Street Global Advisors (SSgA). The ETF “seeks to exposure to S&P 500 companies that display the strongest growth characteristics.”
Investors can also target growth-specific index ETFs, like the iShares Russell 1000 Growth ETF (NYSEArca: IWF) and Vanguard Growth ETF (NYSEArca: VUG). IWF takes growth picks from the large-cap universe of Russell 1000 stocks. VUG selects picks from the largest 85th percentile of the U.S. stocks. The ETFs overweight tech and discretionary names as well.