Three Growth ETFs Down This Month, One Looks Like a Buy

Market Backdrop: Rates, Rotation, and the Growth Space

As March 2026 unfolds, three growth-focused exchange-traded funds have traded lower this month, underscoring a risk-off rotation that has investors reevaluating leadership in the tech-driven portion of the market. The trio—Fidelity Enhanced Large Cap Growth ETF (FELG), Vanguard Growth ETF (VUG) and I Shares Russell 1000 Growth ETF (IWF)—are among the group that analysts say are most exposed when the market shifts away from mega-cap tech toward more selective growth ideas.

The price action isn’t just about stock picking. The rate picture has been a dominant driver, with the 10-year Treasury yield swinging in a narrow range around the mid-4% area after carving a move from the high-3% zone to the mid-4% range earlier this month. In this environment, growth stocks often compress on higher discount rates, and investors lean on fundamentals to guide what to own when sentiment wobbles.

The phrase making the rounds in trading desks is simple: growth plays are vulnerable when yields rise, but the more nuanced question is whether active tilts can outperform passive trackers when leadership shifts. Early March alerts from portfolio managers suggest that the answer may hinge on whether a fund can rotate into improving fundamentals fast enough to offset macro headwinds.

The market has three growth etfs down this stretch, a reminder that not all growth exposure is created equal. Analysts say the heavy dependence on a handful of big names in some growth funds can magnify losses during corrections, while more deliberate, model-driven approaches might weather the pullback a touch better.

The Three Funds In Focus

FELG, VUG and IWF sit at the center of this month’s rotation. Each tracks growth-oriented equities but differs in construction and tilt:

• FELG — Fidelity Enhanced Large Cap Growth ETF blends a quantitative screen with a dynamic approach to exposure. Its model is designed to move away from overvalued mega-cap tech names and toward companies with improving fundamentals, including earnings growth and cash flow quality. The fund also maintains diversification through healthcare holdings like Eli Lilly, tempering concentration risk.
• VUG — Vanguard Growth ETF is a broad, passively managed exposure to the growth segment of the U.S. market. It tracks a large-cap growth index with minimal tilts or defensive offsets, which means it tends to move with the overall growth space and can lag when leadership shifts away from the biggest growth names.
• IWF — I Shares Russell 1000 Growth ETF offers exposure to a wide slice of growth-oriented stocks across large cap names, similar in intent to VUG but with a different index methodology. It also lacks a built-in mechanism to prune exposure during corrections, making it more sensitive to sudden drawdowns when risk sentiment deteriorates.

Performance snapshot (year-to-date through mid-March):

• FELG: about -7.7% year-to-date
• VUG: about -7.8% year-to-date
• IWF: about -6.3% year-to-date

Month-to-date pullbacks (as of mid-March):

• FELG: roughly -3.1%
• VUG: roughly -2.7%
• IWF: roughly -2.4%

Despite the similar direction, each fund’s risk profile differs. FELG’s active tilt is designed to capture pockets of growth with improving momentum, while VUG and IWF offer more straightforward, index-driven exposure to the growth universe.

Fees and size matter too: FELG’s expense ratio sits in the higher end of the growth ETF spectrum, while VUG remains one of the cheaper, broad growth options for cost-conscious investors. IWF sits in the middle for expense, but its sector and stock selections can lead to sharper moves in down markets. Asset levels vary widely, with VUG dwarfing the other two in sheer size, followed by FELG and IWF.

Why One Fund Stands Out: FELG As A Buy Candidate

Amid the pullback, the FELG mandate has drawn attention for its disciplined tilt toward fundamentals, aided by a rules-based rebalancing system that can reduce exposure to overstretched growth bets when sentiment deteriorates. The fund’s healthcare exposure—where several large, cash-generative names sit—adds a stabilizing diversification that helps temper a pure tech-only drawdown.

“The model is designed to trim exposure when valuation and momentum deteriorate, not just to chase performance,” explained Jordan Klein, senior analyst at MarketPulse. “That kind of discipline can limit downside and set up FELG for a more resilient recovery when rate expectations evolve.”

A second, practical factor supporting FELG’s buy thesis: its sensitivity to rate expectations. If the yield path stabilizes or eases, FELG’s rebalancing logic could help it regain leadership sooner than a passive growth tracker that remains exposed to the biggest high-valuation names. In scenarios where fundamentals start to outperform price, FELG’s exposure to names with improving earnings quality could translate into a faster rebound.

Investors weighing FELG against VUG and IWF should consider the following thesis: FELG’s active rules seek to avoid the overhang of overvalued mega-cap tech, which has been a drag on several growth funds this year. In a market environment where rate volatility persists, that strategic tilt can offer a material edge on the downside and potentially a quicker catch-up on the upside.

“If the rate path stabilizes or eases, FELG’s approach could deliver a faster recovery than a broad growth index,” Klein added. “That doesn’t guarantee outperformance, but it changes the odds in a way that can matter for a 12- to 18-month horizon.”

What To Watch Next

• The trajectory of long-term interest rates and inflation data; a cooler inflation print could support a faster risk-on rotation.
• Fund flows into active vs. passive growth exposure, as investors reassess what drives alpha in a volatile rate regime.
• Company fundamentals in healthcare and select software and consumer-discretionary pockets that often anchor FELG’s tilt.
• Comparative performance during future pullbacks to gauge which construction best preserves capital in downturns.

Bottom Line for Investors

Three growth etfs down this month reflect a market grappling with higher-for-longer rates and leadership shifts within growth names. FELG’s quantitative, fundamentals-driven approach gives it a distinctive edge in adverse markets, and the potential for outperformance if the macro backdrop shifts is the core reason many analysts view a buy case as credible. By contrast, VUG and IWF, while offering broad and familiar exposure to growth, may lag in a rapid rate-driven pullback or in environments where leadership rotates away from mega-cap tech toward more defensive growth names.

For readers weighing next steps, the takeaway is not to abandon growth exposure entirely, but to consider how much active tilt a fund brings to the table when the environment calls for more than a simple cap-weighted ride. As markets march toward the end of the quarter, FELG’s model-driven strategy could offer a measured path back toward growth leadership, especially if inflation cools and rate expectations tilt lower.

In the end, the question remains: which growth ETF will prove most adaptable as the landscape evolves? The answer may hinge on how quickly the macro clock permits more selective stock gains to translate into real portfolio gains.