Exchange-traded funds or ETFs for short, are a popular type of pooled investment security that gives investors access to a wide range of markets but operates like a mutual fund. However, unlike mutual funds, ETFs can be bought or sold on a stock exchange just like a regular stock can.
ETFs can be structured to track anything, including the price of an individual commodity or a specific investment strategy. However, they generally track one particular index, sector, commodity, or other assets.
Why are ETFs so popular
ETFs are growing in popularity as investors look to build diversified but low-cost portfolios. They offer investors access to a huge range of financial markets around the world but at a much lower cost than traditional investments funds.
They allow investors to quickly and easily build a diversified global portfolio and are not limited to market indices. ETFs can also invest in specific sectors, such as finance, technology, healthcare, or even corporate bonds.
The benefits of investing in ETFs
- Diversification
- Trades Like a Stock
- Lower Fees
- Immediately Reinvested Dividends
- Tax Efficient
- Lower Price
However, there are different types of ETFs with different levels of risk, so it’s important to have a good understanding of ETF Investing 101 before you invest.
Top Performing ETFs for your Portfolio
Ark Fintech Innovation ETF (ARKF)
Inception: Feb 4, 2019
Category: Large Cap Growth Equities
ARKF is an actively managed ETF with the goal of achieving long-term capital growth. It aims to achieve this by investing at least 80% of its assets in domestic and foreign equity securities of companies that are involved in technology innovation.
That means picking the companies they believe are best positioned to profit from advances in manufacturing, materials, energy, automation, finance, and transportation. These include mobile payment company Square Inc., real estate listings company Zillow, online trading site Mercado Libre, and mobile sports betting company DraftKings Inc.
The fund boasts an impressive track record and holds around 40 stocks at any one time.
SPDR S&P 500 ETF Trust (SPY)
Inception: Jan 22, 1993
Category: Large Cap Growth Equities
This is one of the largest and most popular ETFs in the world. It appeals to investors looking to create a long-term portfolio that includes exposure to many large cap U.S. stocks. Since its inception it has become popular with traders who want to change between risky and safe assets thanks to its excellent liquidity and narrow spreads.
iShares MSCI Emerging Markets ETF (EEM)
Inception: Apr 07, 2003
Category: Emerging Markets Equities
This fund offers exposure to emerging economy stock markets, and is one of the most heavily traded ETF’s in the world. Its popularity is in part down to its ability to be used by investors in a number of different ways.
Investors can increase exposure to risky assets through a short-term trade, or choose to use the fund as a core long-term hold in their portfolio. With hundreds of large cap stocks from a variety of different emerging markets, it is a well-balanced fund.
Beware of the expense ratio on this fund which is more than its rivals, however, it does offer an active options market.
Amplify Transformational Data Sharing ETF (BLOK)
Inception: Jan 17, 2018
Category: Technology Equities
Founded in 2018, this fund invests a minimum of 80% of its net assets in global equity securities of blockchain tech companies, such as those involved in the development and utilization of blockchain technology, and companies partnering or investing in companies that are actively engaged in blockchain technology.
Thanks to its active management approach, the fund remains flexible and able to respond to new developments. Blockchain is the foundation of cryptocurrencies, so if returns on Bitcoin and Ethereum excite you, but the risk is too much for your portfolio, then an investment in the tech that drives them could be an excellent choice.
Fidelity Blue Chip Growth ETF (FBCG)
Inception: Jun 03, 2020
Category: Large Cap Growth Equities
This fund provides investors with a diversified domestic equity growth strategy featuring a large-cap bias. Fidelity’s approach focuses on companies they believe have above-average earnings growth potential combined with a sustainable business model.
With thorough analysis from Fidelity’s global research team, the managers seek to exploit opportunities caused by inappropriate valuations in the market. Current top tech holdings include Apple Inc. and Nvidia Corp. and have helped the fund outperform the market.
The Future of ETFs
As with any investment, ETFs carry a level of risk and investors need to make informed decisions before investing their money. However, they also have many advantages, especially when compared with managed funds. Overall, they are an exciting option for investors, and a great addition to a well-balanced portfolio.
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