Over the years, the stock market has constantly fluctuated. However, at its best, the stock market has created a tremendous amount of wealth, making them a valuable addition to a person’s investment portfolio. However, all of the specifications, strategies, and analyses of picking stocks can be daunting. Exchange-traded funds (ETFs) are a more straightforward investment option whose unique advantages over mutual funds have made them a popular investment choice. In 2021, the total inflows into exchange-traded funds (ETFs) shattered previous records, according to the National Bank of Canada. This was a 28% increase from the previous year.
What is an ETF?
An ETF is a financial instrument that trades on an exchange, just like stocks do. They represent a basket of securities (like stocks) that reflect As shares are bought and sold throughout the day, the value of ETF also fluctuates.
You usually have to select an equity-focused ETF from two broad categories: growth or value. Value investing aims to find undervalued stocks by analyzing a company’s fundamentals.
In their search for potential investment opportunities, value investors often pay close attention to metrics like stable cash flows, earnings, dividends, price-to-earnings (P/E) ratios, and minimal debt. By combining that information with future earnings potential, they calculate an enterprise’s intrinsic value.
On the other hand, growth ETFs invest in rapidly expanding, and often more volatile, companies in the hope of achieving above-average returns. Growth investing aims to find companies whose sales and profits are expected to grow rapidly and generate above-average returns.
For this blog, we look at the 3 Growth ETFs investors should consider to kickstart their portfolio in the first quarter of 2022. In terms of one-year trailing total returns, these three ETFs ranked the top of ETF Screener’s assessments for 2021.
Invesco Dynamic Semiconductors ETF (PSI)
- Performance Over One-Year: 61.9%
- Expense Ratio: 0.56%
- Annual Dividend Yield: 0.13%
- Three-Month Average Daily Volume: 43,526
- Assets Under Management: $859.0 million
- Inception Date: June 23, 2005
- Issuer: Invesco
PSI tracks the Dynamic Semiconductor Intellidex Index. Companies in this index are primarily engaged in manufacturing semiconductors and related products. ETFs invest at least 90% of their assets in stocks that comprise this index. Various investment factors, including momentum in price and earnings, quality, management action, and value, were considered when selecting the 30 semiconductor firms that make up the Dynamic Semiconductor Intellidex Index.
It is a multi-cap fund leaning more toward small- and mid-cap companies. Its top 3 holdings are:
- NVIDIA Corp. (NVDA)
- KLA Corp. (KLAC)
- Applied Materials Inc. (AMAT)
First Trust Small Cap Growth AlphaDEX Fund (FYC)
- Performance Over One-Year: 52.0%
- Expense Ratio: 0.71%
- Annual Dividend Yield: 0.11%
- Three-Month Average Daily Volume: 34,526
- Assets Under Management: $381.7 million
- Inception Date: April 19, 2011
- Issuer: First Trust
FYC tracks the Nasdaq AlphaDEX Small Cap Growth Index, which includes the Nasdaq U.S. 700 Small Cap Growth Index stocks meeting a certain set of investment criteria, which includes price momentum, sales-to-price ratio, and sales growth. The ETF provides exposure to small-cap stocks that have high growth potential. The largest allocation is to the information technology sector, followed by healthcare and consumer discretionary.
Its top three holdings are:
- Class A shares of Dillard’s Inc. (DDS)
- LendingClub Corp. (LC)
- Calix Inc. (CALX)
Invesco DWA Technology Momentum ETF (PTF)
- Performance Over One-Year: 49.4%
- Expense Ratio: 0.60%
- Annual Dividend Yield: N/A
- Three-Month Average Daily Volume: 17,511
- Assets Under Management: $401.8 million
- Inception Date: Oct. 12, 2006
- Issuer: Invesco
PTF tracks the Dorsey Wright Technology Technical Leaders Index. This index uses relative strength as a strategy to identify stocks that exhibit a strong momentum. PTF is comprised of a minimum of 30 securities from the Nasdaq U.S. Benchmark Index. Most of the fund’s allocation goes to software companies, followed by semiconductor companies, semiconductor equipment makers, and IT services providers. This growth ETF invests in companies throughout the market cap but favours those with strong growth prospects rather than those with strong value characteristics.
Its top three holdings are:
- Intuit Inc. (INTU)
- Cloudflare Inc. (NET)
- Advanced Micro Devices Inc. (AMD)
Nour Private Wealth specializes in meeting the needs of high-net-worth families in Canada through investment, wealth planning, and insurance services. For assistance with securing your financial future and finding an investment option that suits your specific needs, contact us today, or visit our website.
