RPG ETF Has the Recipe for More Upside

Growth stocks have made a habit — one measured in years or even more than a decade — of outperforming value fare. With market participants still bullish on AI, among other disruptive technologies, betting against growth could be a risky, unrewarding wager. With that in mind, deeper dives on the various large-cap growth ETFs are warranted. Advisors and investors should be sure to not gloss over the Invesco S&P 500 Pure Growth ETF (RPG).

The $1.7 billion RPG, which turns 20 years old in March, follows the S&P 500 Pure Growth Index. That index assesses growth purity by measuring stocks’ momentum, three-year sales per share growth, and three-year earnings per share/price per share growth. Those filters are meaningful because they ensure RPG lives up to its objective of growth purity. Said another way, some more basic growth ETFs may be diluted by holdings in blend stocks or names with heavy value traits. RPG mitigates those concerns.

A Good Time to Evaluate RPG

Growth stocks are seemingly notching unrelenting gains. That could add to the case for RPG, as does Bank of America’s recent upgrade of growth ETFs.

“We upgrade our category view of US large cap growth ETFs from Neutral to Favorable given strong returns vs. other factors, fresh inflows, and a mature product suite,” said the bank in a recent report. “We still expect the relative returns of value and growth to moderate over the medium term and have a Favorable category view on US large cap value ETFs. Nevertheless, factor diversification is always [important. And] we expect growth funds to remain a useful building block of modern portfolios.”

RPG could be a growth ETF to monitor. That’s because, as of BofA noted, investors typically get involved with growth stocks. That’s due to the fact that they’re aiming to outperform broader blend and value indexes. That view has been rewarded over the past five years. The S&P 500 Growth Index soundly beat its value counterpart in that time frame.

“In this environment, growth has seen an upsurge in investor enthusiasm. Investors have doubled down on their growth exposure, with >$118 billion of inflows to growth ETFs since 2022, more than double the $60 billion of value ETF inflows over the same period,” added BofA.

RPG could be alluring to investors for other reasons. For example, its 22.228% weight to tech stocks is light relative to cap-weighted legacy ETFs in the category. And the fund doesn’t allocate more than 2.86% to any of its holdings. That indicates it’s more diverse than many of the old-guard ETFs in the large-cap growth spectrum.

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