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Four Growth-Stock ETF Plays

NEW YORK ( TheStreet) -- In the wake of the 2008 financial crisis, uncertainty has gripped investors and alternative investments loom large.

Some of the fastest growing ETFs belong to the commodities or emerging markets sectors, in which investors feel that they can find shelter from inflation, a hedge against U.S. markets, or high returns to compensate for losses over the past year.

As U.S. financial markets drift back towards normalcy, however, a strong case can be made for tempering alternative investments with broader market exposure. Growth stock ETFs offer a different exposure than other broad-market funds, with outsized positions in health care, technology and consumer firms. While it is difficult to pinpoint a single sector in which growth stocks will flourish, ETFs offer both large- and small-cap exposure to growth stocks.

Large-Cap Growth Funds

Both the PowerShares Dynamic Large Cap Growth (PWB) and Vanguard Growth ETF (VUG) have performed well in 2009 as top holdings like Cisco (CSCO - Get Report) and Miscrosoft (MSFT - Get Report) rode the recovery. Year to date, PWB has advanced 32% while VUG has risen 33%.

While VUG seeks to mirror the MSCI U.S. Prime Market Growth Index, PWB aims to outperform peers with a "smart" indexing strategy. While VUG's emphasis is on growth stocks with the largest market capitalization, PWB's index bases stock selection on four broad financial perspectives: fundamental, valuation, timeliness and risk.

Both VUG and PWB are weighted towards information technology, health care and consumer staples, but the most noticeable difference between the two funds is the use of financials. While companies in the financial sector make up less than 5% of VUG's underlying portfolio, financial firms make up more than 17% of PWB's underlying holdings. PWB's top 10 holdings include both U.S. Bancorp (USB - Get Report) and JP Morgan (JPM - Get Report).

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VUG $107.15 2.43%
IWO $151.37 -0.12%
PWB $30.35 -0.91%
CSCO $27.25 -1.00%
JPM $59.95 -0.38%


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