If you think you have assembled a properly diversified portfolio of global shares, it may be time to think again.
Does it give you exposure to lithium, a metal that is vital to the electrified economy? Or space exploration? What about semiconductors? Automation? Robotics? Does it include inflation protection? Or funds that will make money when stock markets fall?
You may not need all of these in your portfolio – but you cannot afford to ignore them.
The following low-cost, exchange-traded funds (ETFs) can plug gaping holes in your portfolio and maybe help you benefit from the next big thing.
Some have posted stellar performance lately but, as ever, that is no guarantee of future returns, so understand the risks.
Global X Lithium & Battery ETF
Vijay Valecha, chief investment officer at Century Financial in Dubai, picks out this ETF as one to consider. Lithium is now an essential metal for battery technology, electric vehicles, renewable energy storage and mobile devices.
“This provides a more convenient and less risky way to tap into its growth potential than buying individual lithium stocks,” he says.
Global X invests in companies involved in the full lithium cycle, from mining and refining the metal, right through to battery production. Top holdings include Albermale Corporation, Gangfeng Lithium Co and Yunnan Energy New Material. Performance has been stunning over the past 12 months but don’t expect a repeat.
chief investment officer, Century Financial
Fund size: $4.86 billion
Total expense ratio: 0.75 per cent
One-year return: 130.26 per cent
Yield: N/A
Xtrackers MSCI EAFE Hedged Equity ETF
Do you have too much exposure to the booming US stock market after its recent dramatic outperformance? If so, now could be a good time to spread your money around.
This ETF provides exposure to a spread of developed markets outside the US, Mr Valecha says. “It provides currency-hedged risk to the MSCI EAFE index, which tracks large and mid-cap stocks across 21 developed markets.”
Two thirds of the fund invests in Europe, notably the UK, France and Switzerland, and a third in Asia, mostly Japan.
Fund size: $4.17bn
Total expense ratio: 0.36 per cent
One-year return: 25.05 per cent
Yield: 2.83 per cent
ARK Space Exploration & Innovation ETF
This ETF will tempt investors who want exposure to a sector that is quite literally out of this world: space exploration and tech innovation. It was launched on March 30 by star fund manager Cathie Wood from ARK Invest.
“The portfolio includes orbital and sub-orbital aerospace companies, companies that stand to benefit from aerospace activities and firms that develop technology that enables space exploration, including robotics and artificial intelligence,” Mr Valecha says. Performance has been flat so far but these are early days.
Fund size: $627 million
Total expense ratio: 0.75 per cent
Three-month return: 1.01 per cent
Yield: N/A
Wisdom Tree Managed Futures Strategy Fund
Investors do not only make money when markets are rising, they can also benefit when they fall. Managed futures funds attempt to deliver a positive return either way.
They do this by going both “long” on stocks, in the hope that their share prices will rise, but also by going “short”, profiting when they fall.
This ETF invests in a diversified range of futures contracts covering commodities, equities, foreign exchange and interest rates, Mr Valecha says.
Fund size: $142.9m
Total expense ratio: 0.65 per cent
One-year return: 11.62 per cent
Yield: 0.42 per cent
iShares S&P India Nifty 50 ETF
This will tempt investors who want exposure to the Indian stock market as it tracks the performance of the largest Indian companies through the Nifty 50 benchmark index.
Indian markets have been the best emerging markets performer lately, Mr Valecha says. “They are supported by political stability, a prime-age working population, high foreign exchange reserves and a relatively stable currency, compared to peers such as Mexico, China and Brazil.”
Fund size: $730.7m
Total expense ratio: 0.90 per cent
One-year return: 50.86 per cent
Yield: N/A
Amplify Transformational Data Sharing ETF
Buying cryptocurrency such as Bitcoin or Ethereum is not the only way to invest in the blockchain revolution. You can spread your risk with this ETF.
It invests in the shares of companies actively involved in blockchain technologies, both developers and users, including crypto miners and semiconductor producers.
While risky, its top holdings include solid names such as PayPal, digital payments company Square and Nvidia, as well as specialist holdings such as Hive Blockchain Technologies, Coinbase and Bitfarms. Recent performance has been stunning but again, expect volatility.
Fund size: $1.29bn
Total expense ratio: 0.71 per cent
One-year return: 99.10 per cent
Yield: N/A
iShares Semiconductor ETF
Semiconductors are the building blocks of computers and a vital component in everything from smartphones to headphones to clean energy. They are in short supply right now, due to factory lockdowns, US-China disputes and high demand as car sales recover.
Apple chief executive Tim Cook has warned of a semiconductor shortage hitting its iPhones and iPads.
This ETF gives investors exposure to US-listed companies that design, manufacture and distribute semiconductors, including Nvidia, Broadcom, AMD, ASML Holdings & Texas Semiconductor.
Fund size: $7.38bn
Total expense ratio: 0.43 per cent
One-year return: 68.99 per cent
Yield: 0.67 per cent
Global X NASDAQ 100 Covered Call ETF
This fund may appeal to those seeking maximum income as it currently yields a thumping 11.8 per cent. It does this by following a “covered call” strategy, buying stocks in the Nasdaq 100 Index and selling corresponding call options on the same index.
This historically produces higher yields, particularly in periods of volatility.
Fund size: $4.3bn
Total expense ratio: 0.60 per cent
One-year return: 20.14 per cent
Yield: 11.80 per cent
Vanguard Short-Term Inflation-Protected Securities ETF
Investors who are worried about the impact of inflation on their portfolios could get some protection from an ETF investing in US Treasury inflation-protected securities, or TIPS.
Vanguard’s fund tracks the performance of inflation-protected US government bonds with a remaining maturity of less than five years.
Demand is growing along with inflation fears, Mr Valecha says. “Use these for hedging, rather than as pure investing theme play.”
Fund size: $52.8bn
Total expense ratio: 0.05 per cent
One-year return: 5.33 per cent
Yield: 0.30 per cent
head of investment management, AJ Bell
iShares Automation and Robotics UCITS ETF
If you fancy investing in a “megatrend”, Matt Brennan, head of investment management at AJ Bell, recommends this ETF from fund manager BlackRock’s iShares franchise. It invests in developed and emerging markets companies that are developing automation and robotics technology.
“This gives you exposure to companies at the cutting edge of the technological change that will drive future economic growth,” he says.
Fund size: $3.87bn
Total expense ratio: 0.40 per cent
One-year return: 50.27 per cent
Yield: N/A
Franklin FTSE Korea UCITS ETF
Investors can also use ETFs to get exposure to individual companies and Mr Brennan tips Franklin Templeton’s range of low-cost single country funds.
This one gives you direct exposure to the buoyant Korean economy, one of the fastest growing emerging markets. It targets large and mid-capitalisation stocks by tracking the performance of the FTSE Korea 30/18 Capped Index.
Fund size: $492.25m
Total expense ratio: 0.09 per cent
One-year return: 39.13 per cent
Yield: N/A
Franklin FTSE China UCITS ETF
Every serious investor needs some exposure to the world’s second-largest economy China, and Mr Brennan says this ETF is a cheaper way to do it.
The Chinese stock market has slipped lately, but this could be a buying opportunity for those who want long-term exposure.
Fund size: $209.62m
Total expense ratio: 0.19 per cent
One-year return: -5.37 per cent
Yield: N/A
