Investing in exchange-traded funds (ETFs) can be a smart way to diversify your portfolio, gain exposure to a particular sector of the market, or own a small slice of the market as a whole.
Growth ETFs, specifically, are designed to earn above-average returns over time, as they focus on stocks with higher growth potential. Because you're investing in many stocks at once through an ETF, that can help limit risk while still capitalizing on growth companies.
While there are plenty of growth ETFs to choose from, these three could be smart investments heading into 2026 and beyond.
1. Vanguard Russell 2000 ETF
The Vanguard Russell 2000 ETF (VTWO 2.20%) contains a whopping 1,992 holdings, most of which are small-cap stocks. Small-cap stocks are generally defined as those with a market capitalization of around $300 million to $2 billion, and one of their biggest advantages is their potential for explosive growth.
Every large- or mega-cap stock had to start somewhere, and small-cap stocks provide investors the opportunity to invest in future industry leaders before they take off. While not all small-cap stocks turn into superstar performers, it only takes one to amplify your portfolio.
NASDAQ: VTWO
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The Vanguard Russell 2000 ETF offers a well-diversified approach to small-cap stocks, covering all sectors of the market. While close to 20% of the fund is allocated to stocks in the industrials sector, it's not overly tilted toward any single industry -- and that diversification can help mitigate risk.
Over the last 10 years, it's earned an average rate of return of 9.18% per year. At that rate, if you were to invest $200 per month, you'd accumulate around $209,000 after 25 years.
2. iShares Future AI and Tech ETF
The iShares Future AI and Tech ETF (ARTY 3.34%) focuses on domestic and international companies that are contributing to the advancement of artificial intelligence (AI) technology -- including AI software, services, infrastructure, and more.
The future of AI is still uncertain for now, but if you've been looking to gain exposure to this industry without having to sift through individual stocks, an AI-focused ETF could be a simpler way to buy into the sector. This fund contains only 48 holdings, making it less diversified than some other funds; however, it's highly targeted toward the AI subsector.
NYSEMKT: ARTY
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This ETF is on the riskier side, partly because of its smaller portfolio and partly because the AI sector, in general, can be incredibly volatile. It's also a newer fund, launched in 2018, so it doesn't have the extensive track record of some other ETFs.
That said, if the AI industry continues to boom, this investment could prove lucrative. Its average return over the last five years is a lackluster 8.07% per year, but over the last 12 months, it's earned an impressive 33.77% return.
While there are no guarantees that this investment will continue to perform well (and even if it does, the short term will likely be filled with ups and downs), it has the potential for substantial growth as the industry finds its footing.
3. Vanguard Information Technology ETF
For a broader tech-focused ETF, the Vanguard Information Technology ETF (VGT 1.96%) could be a smart option. This ETF contains 314 stocks from all corners of the technology sector, and its top holdings include industry leaders like Nvidia, Apple, and Microsoft.
This ETF can serve as a middle ground for investors looking for tech exposure without zeroing in on any specific subsector. With much of the portfolio allocated to robust large-cap stocks, this can also help limit some of the risk of investing in the tech industry.
NYSEMKT: VGT
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Over the last 10 years, this ETF has earned a much higher-than-average return of 22.18% per year. If you were to invest $200 per month at that rate, you'd accumulate around $1.6 million after 25 years. Just keep in mind that the tech sector can be incredibly volatile in the short term, so it's wise to keep your expectations in check with this type of investment.
Growth ETFs can be a fantastic way to generate higher returns in the stock market. Whether you're looking for small-cap growth, AI exposure, or diversification within the tech sector, the right fund can supercharge your earnings over time.
