Launched on October 23, 2024, the iShares Top 20 U.S. Stocks ETF (TOPT Quick QuoteTOPT - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Large Cap Growth segment of the US equity market.

The fund is sponsored by Blackrock. It has amassed assets over $296.29 million, making it one of the average sized ETFs attempting to match the Large Cap Growth segment of the US equity market.

Why Large Cap Growth

Companies that find themselves in the large cap category typically have a market capitalization above $10 billion. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.

While growth stocks do boast higher than average sales and earnings growth rates, and they are expected to grow faster than the wider market, investors should note these kinds of stocks have higher valuations. Further, growth stocks have a higher level of volatility associated with them. Compared to value stocks, growth stocks are a safer bet in a strong bull market, but don't perform as strongly in almost all other financial environments.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.2%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 0.25%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Information Technology sector -- about 48.9% of the portfolio. Financials and Consumer Discretionary round out the top three.

Looking at individual holdings, Nvidia Corp (NVDA) accounts for about 17.07% of total assets, followed by Microsoft Corp (MSFT) and Apple Inc (AAPL).

The top 10 holdings account for about 75.4% of total assets under management.

Performance and Risk

TOPT seeks to match the performance of the S&P 500 TOP 20 SELECT INDEX before fees and expenses. The S&P 500 Top 20 Select Index composes of the 20 largest U.S. companies by market capitalization within the S&P 500 Index.

The ETF return is roughly 15.75% so far. In the past 52-week period, it has traded between $21.25 and $30.11.

With about 25 holdings, it has more concentrated exposure than peers.

Alternatives

iShares Top 20 U.S. Stocks ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, TOPT is an excellent option for investors seeking exposure to the Style Box - Large Cap Growth segment of the market. There are other additional ETFs in the space that investors could consider as well.

The Vanguard Growth ETF (VUG) and the Invesco QQQ (QQQ) track a similar index. While Vanguard Growth ETF has $193.37 billion in assets, Invesco QQQ has $373.62 billion. VUG has an expense ratio of 0.04% and QQQ charges 0.2%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.