Investors have been

tapping their collective foot for five years now, waiting for growth stocks to start growing again.

At last, some people on Wall Street think the time is finally right for this once-scorching sector to reverse its long decline. That leaves you, the thrift-minded investor in exchange-traded funds, with a choice to make on which growth-stock index to track.

As usual, there's no shortage of ETFs following the group. So how do you choose the right one when they all look the same?

Well, as always, you can't miss by starting with recent performance -- as hideous as it is -- while keeping a close eye on costs. Doing so brings the field down to a few funds worth considering, led by the

iShares S&P 500/Barra Growth Index

(IVW) - Get iShares S&P 500 Growth ETF Report

and the

Vanguard Growth Vipers

(VUG) - Get Vanguard Growth ETF Report


When it comes to performance, a handful of names come to the fore. Again, we can't stress enough here that just about every fund tracking big-cap tech has gotten hammered ever since the bubble burst in 2000. Still, the ETFs out there vary enough that it's worth taking a look at each one's makeup.

The iShares S&P 500/Barra Growth Index leads the pack, on the basis of its three-year annualized return of -0.54%, followed by the

iShares Russell 3000 Growth Index



iShares Russell 1000 Growth Index

(IWF) - Get iShares Russell 1000 Growth ETF Report

and the

StreetTracks Dow Jones U.S. Large Cap Growth


at -1.09%, -1.37% and -2.86%, respectively.

The Vanguard Growth Vipers and the

iShares Morningstar Large Growth Index

(JKE) - Get iShares Morningstar Large-Cap Growth ETF Report

were introduced in 2004, so they don't have a long enough track record for comparison.

Low and Lower

Before giving IVW the nod, however, note that its three-year outperformance hinges solely on its comparatively strong 2002 return -- a year in which it lost a staggering 23.6% of its value yet managed to best the pathetic runner-up by 3.5 percentage points.

The IWZ beat, if you can call it that, the other growth ETFs that year because it tracks

S&P 500

companies with the highest price-to-book-value ratios -- a strategy that causes the occasional blend or value stock to slip into the fund. Those somewhat questionable growth stocks proved beneficial to IVW's performance in 2001 and 2002, when the average growth fund got slaughtered (as IVW did, only less so). But they held the fund back when growth stocks exploded in 2003.

"The fund's bogy offers a diversified shot of big stocks with strong growth characteristics, but it has a few problems," says Morningstar analyst Dan Culloton. "The index covers all sectors, and its holdings must meet S&P's profitability and liquidity standards. Nevertheless, the bogy hasn't always mimicked the category average of other index funds."

Removing that year as an outlier, the performance crown would shift to IWZ, a subset of the Russell 3000 Index that focuses on stocks with both high price-to-book ratios as well as projected earnings growth. That certainly makes sense, since IWZ also includes some of the mid- and small-cap stocks that have blown away large-cap growth stocks since the bubble deflated.

Nevertheless, should the market tides turn in favor of large-cap growth stocks, as many strategists are anticipating, adherents to the Russell indices might prefer to switch to IWF, which contains the biggest members of the Russell 1000 Index.

There is, of course, absolutely no reason to own both the IWZ and IWF, since their top 25 holdings are practically identical. The IWF is slightly more concentrated, with 25% of its assets in its top 10 holdings, compared with 23% for the IWZ. Both include the usual suspects in their top 10:


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Wrong Side of the Tracks

It makes sense that the index tracking the most stocks -- there are 1,993 stocks in the IWZ -- has the lowest concentration in the top 10. Conversely, investors preferring a more concentrated portfolio might opt for the JKE, which tracks the Morningstar Large Growth Index. The JKE holds 42% of its assets in its top 10, and Microsoft, its top holding, makes up a healthy 9.5% of the fund. The fund holds a total of 82 names.

Not only does the IVW have the best performance over the past three years among its competitors, it also has the lowest standard deviation, a measure of volatility, at 14.24. StreetTracks' entry, ELG, has the highest in the growth category at 16.69.

IVW may currently be in the lead in terms of performance and risk, but Vanguard's entry into the growth ETF arena, VUG, is the leader in perhaps the most important metric to many ETF investors: Cost.

The VUG carries an expense ratio of 0.15%, compared to 0.18% for IVW, the next-closest competitor. The JKE and the IWZ have the highest costs at 25 basis points.

VUG, which is run by Vanguard index guru Gus Sauter, follows the MSCI U.S. Prime Market Growth Index, a benchmark that contains the 750 largest companies in terms of free-float market capitalization. MSCI defines growth stocks according to an eight-factor model that includes metrics as diverse as dividend yields and long-term per-share historical sales.

"Cost is king in the ETF world, because these offerings rely on low expenses to gain an advantage over pricier, actively managed funds," says Morningstar analyst Sonya Morris. "That principle isn't lost on this fund."