QQQ - IVW: Worth Considering If Growth Continues

2024-01-19 16:11:57 ET

Summary

• iShares S&P 500 Growth ETF is a way to play the growth style rotation in the market.
• The IVW ETF has a considerable asset base and aims to replicate the performance of the S&P 500 Growth Index.
• IVW has a significant concentration in top holdings like Microsoft, Apple, Alphabet, Nvidia, and Amazon.

I much prefer value over growth this year given how extended the Technology sector is relative to everything else. Having said that, I could very well be wrong in thinking that a style rotation persists into end of year. If that's the case, the growth still works, and the iShares S&P 500 Growth ETF ( IVW ) is one way to play it. IVW is a passively managed exchange-traded fund, launched in 2000 by BlackRock (BLK). It aims to replicate the performance of the S&P 500 Growth Index, providing exposure to large-capitalization U.S. equities that exhibit growth characteristics.

The fund has a considerable asset base, with total assets under management exceeding $36 billion. This makes it one of the largest ETFs in the Large Cap Growth segment of the U.S. equity market. The fund's primary goal is to offer broad exposure to growth stocks within the S&P 500 Index (SP500).

Top Holdings

IVW has a diversified portfolio with various holdings. However, a significant concentration can be seen in the top five holdings, which collectively constitute a significant portion of the portfolio.

1. Microsoft Corp ( MSFT ) : A dominant player in the technology sector, Microsoft Corp is the largest holding in the IVW portfolio, with a 13.51% weighting

2. Apple Inc ( AAPL ) : As a leading global tech giant, Apple Inc makes up the second largest portion of IVW's holdings, accounting for nearly 12.5% of the total assets.

3. Alphabet Inc ( GOOGL ) : As the parent company of Google, Alphabet Inc stands at 7.23%

4. Nvidia Corp ( NVDA ) : A key player in the semiconductor industry, Nvidia Corp makes up 6.46% of the portfolio.

5. Amazon.com Inc ( AMZN ) : The e-commerce giant makes up 6.44% of the portfolio

These are the giants. These are the winners. These are also the most vulnerable given how crowded they are in nearly all broad market averages. It's clearly working. I just question for how much longer.

Sector Composition and Weightings

An essential aspect to consider when investing in an exchange-traded fund, or ETF, is its sector composition and weightings. IVW ETF's most substantial allocation is towards the Information Technology sector, which constitutes about 47.11% of the portfolio.

Peer Comparison

Two prominent peers of IVW are the Vanguard Growth Index Fund ETF Shares ( VUG ) and the Invesco QQQ Trust ETF ( QQQ ). While VUG has a lower expense ratio (0.04%) than IVW (0.18%), QQQ (0.20%) both have outperformed IVW in terms of past performance.

Pros and Cons

Like any investment, investing in IVW also comes with its own set of advantages and disadvantages.

Pros

1. Diversification : The IVW ETF offers broad exposure to the growth segment of the S&P 500, thereby providing a diversified investment portfolio.

2. Strong Performance : Over the years, IVW has demonstrated a strong performance, especially in bullish markets where growth stocks tend to outperform.

3. Managed by BlackRock : Being managed by BlackRock, a global leader in investment management, adds credibility to the fund.

Cons

1. Higher Volatility : Growth stocks are often subject to higher volatility, which can lead to larger price swings.

2. Higher Expense Ratio : Compared to its peers, IVW has a slightly high expense ratio, which can erode returns over time.

3. Market Risk : Like any equity investment, IVW is susceptible to market risk. Changes in economic, political, or regulatory conditions can impact the fund's performance.

Conclusion: Should You Invest?

The decision to invest in the iShares S&P 500 Growth ETF ultimately depends on your investment objectives, risk tolerance, and market outlook. While the fund offers broad exposure to growth stocks and has demonstrated strong past performance, it also carries a higher level of risk and a higher expense ratio compared to some of its peers. This is ultimately a question of momentum and all leaders continuing to charge further. The fund does what it's supposed to do, I'm just not certain the cycle is favorable now for that to continue.

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