A Scorching Hot ETF Worth the Growth Jolt

Passive Canadian investors looking for a U.S. growth jolt without having to pick individual names may wish to consider broadening their horizons beyond the TSX-traded ETFs that provide exposure south of the border. In a prior piece, I highlighted how it’s still worth it to buy U.S.-traded ETFs as well.

If it’s not the lower expense ratios (the fees you’ll pay to the fund’s managers), it’s the unique mix of stocks that may not have a close comparable on the TSX Index. In this piece, we’ll look closer at some U.S.-traded ETFs that I think might be worth picking up while the Canadian dollar is still relatively hot.

With the U.S. Federal Reserve mixed on what comes next (rate hike or cut?), I do think the loonie could be in for a bit of a pullback. Whether that represents an opportunity to make the jump from Canadian dollars to greenbacks remains the big question. Either way, I think there’s a lot of impressive growth to be had by diversifying into some U.S. ETFs that are still quite popular among Canadians.

In this piece, we’ll look at three intriguing growth-focused ETFs for Canadians who want exposure to the U.S. tech sector as it is experiencing a bit of AI disruption and growing fear of high spending. You’ve got to spend money (in AI) to make money, right? In any case, let’s check in on a growthier ETF that is worth venturing into the American exchanges for, preferably, to give your RRSP a nice growth jolt.

Vanguard Mega Cap Growth Index Fund

I was quite surprised to see the Vanguard Mega Cap Growth Index Fund (NYSEMKT:MGK) among the most popular of U.S. ETFs owned by Canadian investors. When you consider the low expense ratio (just 0.05%) and the huge dose of mega-caps as well as the lack of TSX-traded comparables, perhaps it shouldn’t be that much of a shocker to envision Canadian investors buying up the MGK. Remember that your RRSP is effectively a “shield” from the pesky 15% U.S. withholding tax on dividends paid.

After all, mega-cap growth has been where the returns have been in recent years. More recently, the MGK slipped 9% from its all-time high as investors showed more love for small caps.

Could small-cap value be the new theme? Or is the dip in large growth a buying opportunity? I think it’s the latter. If you like mega-caps (specifically mega-cap tech) and want to take advantage of the relative retreat in the slowing giants, I’d argue the MGK is a stellar pick right here. Despite the recent slip, the long-term momentum is still very much intact. The ETF is still up 84% in five years. And if I were to guess, I’d label this latest correction as a yawn-worthy dip that long-term thinkers need not hit the panic button over.

As others “rotate” after the fact, perhaps it’s time to stick with the proven performers for the long-term game. At the end of the day, AI is a field that requires massive investment. And the smaller players might not have the wallets to stay ahead. Either way, I think MGK is a great U.S. ETF to add to your watchlist if you’re looking for value in the obvious or opportunities hiding in plain sight.

The post A Scorching Hot ETF Worth the Growth Jolt appeared first on The Motley Fool Canada.

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More reading

• 2 Canadian Growth Stocks Supercharged to Surge in 2026
• 2 TSX Stocks Under $50 That Could Skyrocket
• The Top Canadian Stocks to Buy Right Away with $45,000
• Canadians: Here’s How Much You Need in Your TFSA to Retire
• My Top Canadian Dividend Stocks You’ll Want to Own Forever

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.