With the clock about to roll past 2014 and into the New Year, it’s time for investors to be looking ahead with regards to their portfolios. That can be a daunting task, however, as it’s difficult to predict exactly what will happen over the progression of a year.
ETFs are intraday tradable baskets of stocks or other assets that make playing various global trends — both short and long-term — easy. And as some trends are already beginning to emerge, we can use them to tweak our portfolios accordingly to maximize profits.
So what exactly are some of those trends and which ETFs are the ones to purchase for our portfolios?
Luckily, here at InvestorPlace, we’ve shifted through the nearly 1,600 ETFs and came up with our top five ETFs to buy for 2015.
The Best ETFs To Buy For 2015: The iShares MSCI USA Minimum Volatility ETF
For the most part, things are going pretty good. Job growth seems to be picking up, while lower gas prices have consumers dancing in the streets. The unfortunate thing is that falling oil prices have the potential to cripple one of the main drivers of the recent U.S. growth.
Add in the fact that the Fed’s loose monetary policy has pushed investors into riskier assets in order to find returns/yield and you have a recipe for increased volatility.
Which is why the iShares MSCI USA Minimum Volatility ETF (USMV) maybe a good bet.
USMV uses screens to kick out high-volatility stocks and capture the upside of the market. That also limits the downside as well as the “bounciness” associated with market movements. Currently, the $34 billion ETF holds 159 different stocks, including Becton, Dickinson and Co. (BDX) and Wal-Mart Stores, Inc. (WMT).
USMV’s underlying index has done a good job of fighting volatility and downside risk. Back in 2008, the broader MSCI USA index was down 37% while USMV was only down 26%.
While the chance of recession is small, it is building. At just 0.15% in expenses, USMV is a cheap way to fight that potential and is a one of the best ETFs to buy for 2015.
The Best ETFs To Buy For 2015: Vanguard FTSE Europe ETF
Despite the headwinds, both the Dow Jones Industrial Average and the S&P 500 are sitting at all-time highs. That doesn’t make them screaming buys at the current moment. But European equities just might be.
Currently, European stocks can be had for a 40% discount to their American counterparts. That in of itself is tantalizing. However, the real boost may come from various QE programs being enacted on the continent. That should boost asset prices in the near term.
The Vanguard FTSE Europe ETF (VGK) tracks the FTSE Developed Europe Index and includes both large and mid-cap stocks in Europe. Top country weights include the U.K., Switzerland and France.
All in all, VGK holds 528 different stocks. That makes VGK a prime play on Europe’s cheapness and potential growth in 2015.
Add in Vanguard’s commitment to running cheap funds — VGK only charges 0.12% in expenses — as well as the ETF’s 3.81% dividend yield and you have a great ETF pick for 2015.
The Best ETFs To Buy For 2015: Direxion Daily Russia Bear 3X ETF
The continued sanctions for its “involvement” in the Ukraine have already put the hurting on President Vladimir Putin and the Russian economy. Now the recent fall in energy prices will be the final nail in the coffin.
The vast bulk of Russia’s national revenues come from selling oil and natural gas. With oil now at such cheap levels, Russia could have trouble paying its bills and funding its social programs.
In fact, Russia’s Finance Minister Anton Siluanov said that with oil trading at $60 per barrel, a recession in the nation was “inevitable.”
Needless to say, the Direxion Daily Russia Bear 3X ETF (RUSS) could be a big big buy in 2015.
RUSS uses derivatives to promise 300% of the inverse — read: opposite — performance of the popular Market Vectors Russia Index ETF Trust (RSX). Basically, it shorts Russia with some extra “oomph.” So far, RUSS has done pretty well as the sanctions and lower oil prices have taken hold. If Russia slips into recession, the ETF could outperform even more.
Now RUSS isn’t for everybody and isn’t a long-term hold. However, it could be one of the best ETFs to buy in 2015.
The Best ETFs To Buy For 2015: Energy Select Sector SPDR ETF
While lower prices will send Russia into a recession, it does open up a great ETF opportunity to buy in 2015. Namely, U.S. energy producers in the Energy Select Sector SPDR ETF (XLE).
The vast bulk of the producers in the XLE, such as Exxon Mobil Corporation (XOM) and Range Resources Corporation (RRC), have steady production, cash flows and are still profitable with oil down where it is. The ETF is full of firms that will be able to weather the storm of low prices.
And with a current price-to-earnings ratio of 13, the XLE hasn’t been this cheap in years.
However, that cheapness may not last throughout 2015.
Analysts are already predicting a rebound in the price of W&T Offshore, Inc. (WTI) next year. WTI is estimated to hit $72 per barrel in 2015. That should help boost the profits and bottom lines for the 46 energy stocks in the XLE.
Featuring large trading volumes and just 0.16% in expenses, the XLE could be one of the best ETF ways to play the rise and rebound in oil prices in 2015. It makes a perfect tactical ETF positon.
The Best ETFs To Buy For 2015: ETFS Physical Palladium ETF
Forget about gold. The precious metal play for 2015 is palladium and the ETFS Physical Palladium ETF (PALL) is the only way to play.
PALL is being supported by several major tailwinds that should continue to lift the fund and metal higher in 2015. The key is that 67% of palladium demand is driven by driving. The automotive industry is the main consumer of the metal as it goes into catalytic convertors for emission controls.
The overall lower oil — and therefore lower gasoline prices — have helped push up auto sales over the last month. Demand for palladium is expected to rise throughout 2015.
And yet, supplies of the metal will remain short.
The two largest producers of the metal are Russia and South Africa. We know about Russia’s woes, but South America’s production has recently been cut due to a serious of violent and long employee protests and strikes. All in all, the issues in the two nations have cut supplies to the deepest shortfall in about 14 years.
Stockpiles won’t be refilled due to demand and palladium’s 162 million-ounce shortfall in 2015 will be the biggest in more than 30 years.
That should boost prices for the physically-backed metals ETF. Already, PALL has down pretty well rebounding off its lows. But analysts estimate that the ETF could retouch former highs as the shortfalls take place.
As of this writing, Aaron Levitt holds no position in any of the aforementioned securities.