After a lengthy run of outperforming value and seemingly every other factor, growth stocks are retreating mightily this year, and those with the disruptive growth label are bearing the brunt of the punishment.
However, some market observers aren’t giving up on growth equities, indicating that there’s still a compelling case for exchange traded funds such as the Goldman Sachs Future Tech Leaders Equity ETF (GTEK ).
As has been widely noted, growth stocks are languishing this year due to rising interest rates, but the other side of that coin is that assets such as GTEK are becoming more attractive on valuation amid Federal Reserve rate tightening.
“We believe there is always a place for growth stocks in a portfolio, and their long-term track record is a strong endorsement. Over the past 10 years, the Russell 1000 Growth Index has provided an average annual return 2% above the broader Russell 1000,” according to BlackRock research.
GTEK is a credible way for risk-tolerant investors to nibble at innovative growth equities today without getting bogged down with stock picking. After all, the Goldman Sachs ETF is actively managed and can focus on high-conviction names — a strategy that often pays off over the long term when it comes to disruptive growth names.
“Growth stocks are about innovation, and innovation is not stopping. Trends toward digitization, e-commerce and artificial intelligence, to name just a few, are firmly intact. We believe the challenges companies face today will only motivate more innovation. A tight labor market and rising input costs will fuel the search for industrial and technological improvements and efficiencies,” added BlackRock.
The note from the asset manager mentions communication services, e-commerce, and software as among the opportunities to consider among growth stocks. All three segments are represented in the GTEK lineup.
Another reason to consider the benefits of GTEK’s status as an active fund is that an active approach can emphasize quality while keeping investors away from highly speculative fare — two traits to embrace in the current environment. Plus, GTEK isn’t heavily dependent on mega-cap stocks.
The mid-cap growth arena is home to “a combination of niche market leaders and up-and-comers that have unique products and solutions we believe can enable them to take market share and grow. Ultimately, history has taught us that financial markets reward earnings and earnings growth over time,” concluded BlackRock.
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