It seems like the market is going bonkers everywhere, with China stocks crashing and Europe in turmoil and American equities moving sideways as investors worry what’s next.
But thankfully, there are plenty of targeted and strategic ETFs that can allow individual investors to take advantage of big-picture trends and seize the biggest opportunity in any market.
I’m not talking about inverse funds, either, which simply take the opposite side of a trade – frequently via aggressive strategies. I’m talking about banking on the few bright spots right now, including Asian economies benefiting from central bank and government intervention or obscure healthcare funds with a unique way to cash in now.
So what are some of these best ETFs that are delivering big profits even in a challenging market? Here are five biggies:
Best ETFs: ALPS Medical Breakthroughs ETF (SBIO)
- YTD Performance: 42% vs. a flat S&P 500
- Assets: $130 million
- Expense Ratio: 0.5%, or $50 annually on $10,000 invested
- Top Holdings: Receptos Inc. (RCPT), Horizon Pharma PLC (HZNP), Seattle Genetics (SGEN)
The ALPS Medical Breakthroughs ETF (SBIO) is a fund that zeroes in only on small- and mid-cap biotechs, in the range of $200 million to $5 billion. This focus on smaller funds allows the SBIO ETF to catch many high-growth companies in their very early days, and lately there have been far more winners than losers.
It’s an aggressive play on the next generation of drugs and drugmakers, and has been quite a lucrative one in 2015.
Best ETFs: Deutsche X-trackers Harvest CSI 500 China A-Shares Small Cap ETF (ASHS)
- YTD Performance: 41%
- Assets: $35 million
- Expense Ratio: 0.8%
- Top Holdings: Eternal Asia Supply Chain, Yihua Timber, Beijing Teamsun Technology
Yes, there has been a big rout in Chinese stocks lately. But thanks to a parabolic run-up in the Deutsche X-trackers Harvest CSI 500 China A-Shares Small Cap ETF (ASHS), the fund still is up by more than 40% in 2015.
The problem? ASHS is on a heavy downswing, off 40% in the past month alone, and there’s no guarantee that the worst is over, so it might just be a matter of time before the ASHS ETF is back to flat.
The flip side? China’s not afraid to pour its efforts into lifting its stock markets. Should those efforts bear fruit, ASHS could jump back to life.
Best ETFs: WisdomTree Japan Hedged Financials Fund (DXJF)
- YTD Performance: 22%
- Assets: $30 million
- Expense Ratio: 0.43%
- Top Holdings: Mitsubishi UFJ Financial (MTU), Sumitomo Mitsui Financial (SMFG), Tokio Marine Holdings (TKOMY)
It’s no secret that the return of Abenomics late last year resulted in a lot of optimism in Japan, including a run-up for Japanese equities.
But while many of these stocks have lost some of their gains in currency translation, the WisdomTree Japan Hedged Financials Fund (DXJF) has been able to supercharge its returns thanks to hedging against the weakening yen. It adds up to market-trouncing performance for this bank-focused Japan ETF.
Best ETFs: PowerShares S&P Small Cap Health Care Portfolio (PSCH)
- YTD Performance: 20%
- Assets: $241 million
- Expense Ratio: 0.29%
- Top Holdings: Parexel International (PRXL), Amsurg (AMSG), Impax Laboratories (IPXL)
Another high-flying domestic equity ETF that’s similar to the medical breakthroughs fund is the PowerShares S&P Small Cap Health Care Portfolio (PSCH).
As the name implies, PSCH is focused on small healthcare names, but this time the holdings include medical services and device companies, not just drugmakers and biotech firms.
Though slightly more diversified than the aforementioned SBIO fund, the PSCH ETF shares the bias toward smaller and fast-growing companies — a bias that has paid off in 2015.
Best ETFs: Market Vectors Russia ETF (RSX)
- YTD Performance: 20%
- Assets: $2 billion
- Expense Ratio: 0.61%
- Top Holdings: Gazprom (OGZPY), Lukoil (LUKOF), Magnit
Remember back when Russia was in the news, saber-rattling over Ukraine and generally creating havoc? Well, apparently things don’t look so bad for Russian stocks now that there’s ISIS running amok, Chinese stocks crashing and Greece at risk of bankruptcy.
Rebounding commodity prices have lifted the energy-focused Market Vectors Russia ETF (RSX) significantly year-to-date after big declines in 2014, and if oil prices can hang on, this fund could stage a continued comeback across the rest of this year.
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” As of this writing, he did not hold a position in any of the aforementioned securities. Write him at [email protected] or follow him on Twitter via @JeffReevesIP.