Large-Cap Growth ETFs: Large Technology Companies Are Doing Well

In large cap company stock investing, it is said that the market is so efficient that it is hard to beat market indices. This is because in this category, stocks are well researched and information is well known to many fund managers and even individual investors. Investors should pay attention to low cost index funds or ETFs.

Large-cap stocks can be broken down into growth and value styles. In this article, we look at large cap growth ETFs. Growth investors are typically interested in the stock that has the potential to grow. It is largely justified by the earnings of these stocks as these earnings expand at a faster rate than average. Stocks in technology, healthcare, and consumer discretionary sectors are typically a growth investor's sandbox.

Please see below the tables of ETFs.

Description	Symbol	1 Yr	3 Yr	5 Yr	Avg. Volume(K)	1 Yr Sharpe
iShares Russell 1000 Growth Index	IWF	18.24%	0.95%	3.65%	2,148	112.66%
iShares S&P 500 Growth Index	IVW	16.97%	0.72%	3.44%	514	109.99%
Vanguard Growth ETF	VUG	17.68%	0.28%	3.8%	364	107.42%
PowerShares QQQ	QQQ	15.21%	4.08%	7.49%	52,284	78.98%

For more recent performance, refer here.

All the growth ETFs are performing well and the returns are well above 5% within one year. In terms of return IWF is the best performer in one year. Among broad base index ETFs (i.e. excluding QQQ, which is mainly in large technology stocks), Vanguard Growth (VUG) again won its first place in the 5 year time frame, though not in the 3 year time frame.

After the internet bubble burst in 2002, U.S. technology stocks, especially large high tech companies, have done well. They are well capitalized and flush with cash. These companies managed conservatively and benefited greatly from globalization (both in terms of global market penetration and cost reduction). This explains why PowerShares QQQ, which tracks Nasdaq 100 largest company stocks, has done so well in the past five years. The Fund will normally invest at least 90% of its total assets in the common stocks that make up the Index. The graph below shows market cap and style allocation as of June 17, 2011:

The total expense ratio is 0.61%. The low expense ratio is very important when a long term ETF strategy is required.

The fund has an average market cap of $179.6 billion, along with the largest beta amongst this group of funds at roughly 1.30. Information technology is the largest sector with a recent share of 30.94%. Below is the sector allocation of QQQ as of June 17, 2011:

As of 6/23/2011, QQQ has the following top holdings

Company Symbol % Assets Apple Inc. AAPL 12.32 Microsoft Corporation MSFT 8.35 Oracle Corporation ORCL 6.6 Google Inc. GOOG 4.89 Intel Corporation INTC 4.63 Cisco Systems, Inc. CSCO 3.69 QUALCOMM Incorporated QCOM 3.53 Amazon.com, Inc. AMZN 3.42 Comcast Corporation CMCSA 2.17 Amgen Inc. AMGN 1.99

For information on more ETF performance, please refer to here.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclaimer: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.