Ideas to Tackle Risk in Hot Growth ETFs

Being an equity growth investor has been a rewarding experience in the past year. Whether you’ve focused on the Magnificent Seven, or the Fabulous Five, or just bought the Invesco Nasdaq 100 ETF (QQQ) -- one of the most popular ETFs so far in 2024 -- growth has been your friend.

Performance has been strong. Media buzz is even stronger. Watching growth run-up has made for exciting charts and colorful conversation. But that doesn’t mean growth can’t start to look expensive. It feeds some nervousness given its concentration on a few names and sectors. Not to mention its vulnerability to economic conditions and the rate environment.

This year, we’ve been talking a lot about the ongoing pursuit of diversification among ETF investors. Advisor surveys suggest a growing concern. Asset flows into things like liquid alternatives confirm the jitters. Bulls are still plenty bullish, but there’s a growing call for caution. What if rates don’t come down or if geopolitical tensions burn hotter? What if the economy cools down and what if sticky inflation proves stickier?And what if upcoming elections do us all in?

There is good news, though. When it comes to equity growth investing, there are ways to manage risk without having to give up on participation.