The value factor succumbed to growth’s comeback despite a strong start to 2021. Investors can score max growth opportunities using the Invesco S&P 500 Pure Growth ETF (RPG).
Per its fund description, RPG seeks to track the investment results of the S&P 500® Pure Growth Index. The fund generally will invest at least 90% of its total assets in the securities that comprise the underlying index. The underlying index is composed of a subset of securities from the S&P 500® Index that exhibit strong growth characteristics.
“Companies within the growth segment offer tremendous profit potential since they are still in the early stages of their life cycle, which in turn also raises the risk level associated with this asset class,” an ETF Database analysis said. “Growth stocks may also appeal to those seeking capital appreciation versus dividend income, as these companies re-invest earnings.”
The split between general growth and value is readily apparent, especially when looking at the S&P 500 growth index versus the value index. Value was leading handily by the end of May before growth surged past it by mid-summer.
In the meantime, RPG is up 19% so far this year. A tilt towards pure growth means investors won’t see large-tech names like Apple or Amazon in its top 15 holdings.
Instead, investors will still see familiar names like NVIDIA and Paypal. Additionally, allocations never exceed 2.46%—the largest holding goes to Monolithic Power Systems.
Sticking with Growth for the Rest of 2021?
Given growth’s recent push higher, is it a sustainable trend for the rest of 2021? It will largely depend on the given investor’s preferences.
“Which style you might favor typically has a lot to do with your objectives, risk tolerance, and investment horizon,” said Viraj Desai, Senior Portfolio Manager, TD Ameritrade. “Although you shouldn’t change your overall investment plan without keeping those key parameters in mind, you also don’t want to stumble along blindly when fundamentals undergo a tectonic shift, as they did last year.”
Growth isn’t necessary for the dividend investor, but RPG can fit in nicely for investors seeking companies that re-invest their earnings.
“Growth stocks may also appeal to those seeking capital appreciation versus dividend income, as these companies re-invest earnings,” the analysis said further. “RPG is linked to an index consisting of roughly 130 holdings and exposure is tilted most heavily towards consumer cyclical and technology.”
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