Growth at a Reasonable Price (GARP) ETFs

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Contributor, Benzinga
March 13, 2023

Growth at a reasonable price (GARP) is an investment strategy that seeks to identify companies that have both strong growth potential and a reasonable valuation. This strategy is based on the belief that companies with sustainable growth rates will outperform over the long term, but that investors should not overpay for that growth.

GARP ETFs are exchange-traded funds (ETFs) that employ this investment strategy. These ETFs typically invest in a diversified portfolio of stocks that meet certain growth and value criteria, as determined by the ETF's index or methodology. GARP ETFs can be a good way for investors to gain exposure to a diversified portfolio of companies that have strong growth potential without having to do the stock picking themselves.

Benefits of Investing in GARP ETFs

  1. Combines growth and value: GARP ETFs offer investors a way to invest in companies that have strong growth potential but are still undervalued by the market.
  2. Diversification: GARP ETFs provide investors with a diversified portfolio of stocks, which helps to reduce risk and minimize the impact of individual company performance on overall returns.
  3. Cost-effective: GARP ETFs are often more cost-effective than actively managed funds, as they do not require the same level of research and analysis.

Risks of Investing in GARP ETFs

  1. Market risk: Like any investment, GARP ETFs are subject to market risk. If the market experiences a downturn, GARP ETFs will likely see a decline in value.
  2. Concentration risk: GARP ETFs can be concentrated in certain sectors or industries, which can increase risk if those sectors or industries experience negative performance.
  3. Index risk: GARP ETFs are typically designed to track a specific index or methodology, which means that the performance of the ETF is tied to the performance of that index. If the index underperforms, the ETF will also underperform.

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