The Smartest Growth ETF to Buy With $100 Right Now | The Motley Fool

Every investor loves a strong bull market with soaring stocks. But rising prices often come with rising valuations, making it more challenging to choose the best stocks for your portfolio. However, it’s always a good time to be in the stock market, as long as you have a long-term outlook. And there are methods for making the stock-picking process simpler.

Many investors love to buy exchange-traded funds (ETF), at least in addition to individual stocks. It can take the guesswork, and lots of the risk, out of investing. If you have $100 to invest today (or really $114 at today’s price) and are looking for an excellent growth option, the Vanguard Russell 1000 Growth ETF (VONG 0.58%) is a great choice.

High diversification, low risk

Growth ETFs come in many forms. There are smaller, more curated ones, midsize index trackers, and large index trackers. The risk level is usually connected to the size of the ETF’s portfolio, since in funds with fewer positions each stock has more of an impact. At the same time, funds with more holdings may have a lower chance of high market outperformance since they come closer to mimicking the overall market.

Vanguard is known for its wide range of ETFs that track indexes. They’re all passively managed, which means that they simply own whatever’s in the index instead of having a manager choose the stocks. It passes on the savings of a manager’s fee to the investors. Because it’s a passive index ETF, it has a low expense ratio of 0.07%, whereas Vanguard says the average for this kind of ETF is 0.93%.

The Russell 1000 ETF tracks the Russell 1000, an index of 1,000 broadly diversified stocks that are mostly large-cap U.S. stocks. That’s tremendous diversification, which lowers the risk of any stock not performing well. It also gives investors exposure to many different classes and categories.

However, since it’s weighted, the largest stocks in the index make up a disproportionately large amount of the total. Nvidia, Microsoft, and Apple collectively account for more than a third of the total, and the other 997 or so stocks make up the remaining two-thirds. One benefit is that investors gain as the highest-growing stocks in the index gain, and as stocks get traded in and out based on the criteria of the index, the index stays ahead of the market.

You also get exposure to smaller, less well-known stocks that have huge growth opportunities. Some of the growth ETF’s smaller components include names like Ultragenyx Pharmaceutical and SoFi Technologies.

Excellent long-term results

In general, an ETF with that many components is going to mirror how the market is doing. But because it’s limited to larger stocks, which implies stocks that are growing, it’s likely to outperform the market over time. Even though it’s not in the top 10 of Vanguard’s best-performing ETFs this year (out of 97 options), it’s the third-highest gainer over the past 10 years, with more than 17% annualized average gains over that time. Compare that with the S&P 500.

^SPX data by YCharts

If you’d invested $10,000 in each 10 years ago, you’d have a lot more money today.

^SPX data by YCharts

Unlike other growth investments, that gain would come with low risk and costs. And because the price per share is only $114, you can easily get started even if you don’t have a huge amount to invest today. That makes this the smartest choice you can make with that starting point.