Broadly speaking, exchange traded funds as an asset class have been solid, but not spectacular so far in 2016. As such, finding the best ETFs can be fairly challenging.
Assets under management for all the world’s ETFs reached a record $3.13 trillion at the end of April, and in the U.S. — the world’s largest ETF market — total ETF assets under management resided at a record $2.17 trillion, according to ETFGI.
However, as of May 18, ETF net inflows were just $23.9 billion, representing the slowest start to a year through the first five months since 2010, according to Lipper data.
Of course, there have been pockets of strength in the world of ETFs this year, many of which hail from the precious metals arena. In fact, this list of 2016’s best ETFs to date could be entirely comprised of gold and silver miner ETFs.
Of the 10 best ETFs that are not leveraged funds on a year-to-date basis, nine are gold or silver miner funds. And of the 20 ETFs that are up at least 50% year-to-date, 14 are gold or silver miner funds, including leveraged ETFs.
The following are five of the best ETFs of 2016. Note: It’s more than just gold and silver miner funds.
Best ETFs in 2016
The PureFunds ISE Junior Silver ETF (SILJ) is the only non-leveraged ETF that has doubled this year. Actually, SILJ has done more than that, as it is easily one of this year’s best ETFs due to its gain of nearly 130%, year-to-date. The takeaway here is that when conventional silver ETFs are ripping higher, the combination of silver and small-caps proves particularly potent.
By comparison, SILJ’s large-cap rival is up “just” 83% this year. SILJ, the only ETF dedicated to small-cap silver miners, charges 0.69% per year, or $69 for every $10,000 invested.
The next pick, iShares MSCI All Peru Capped ETF (EPU), is the only single-country fund found among this year’s best ETFs. It is also the only non-leveraged emerging markets ETF on that list.
EPU, the only ETF dedicated to Peruvian stocks, is one of this year’s best ETFs for an obvious reason: Peru is one of the world’s largest silver producers and a major gold producer.
There is, however, another important reason why EPU is up 45% year-to-date. Peru recently dodged an ominous frontier markets demotion at the hands of index provider MSCI. Countries that are demoted to frontier from emerging status usually see their stock markets punished after that news is announced.
Good thing for EPU, Peru dodged that fate.
The Global X Gold Explorers ETF (GLDX) is also one of the best ETFs so far this year. It is also this year’s best-performing, non-leveraged gold miners ETF with a gain of 86%. GLDX follows the Solactive Global Gold Explorers Total Return Index and holds 22 stocks.
None of GLDX’s constituents are U.S. companies, but this is a developed markets ETF as Canadian and Australian companies combine for over 98% of the ETF’s weight. Like other gold miner ETFs, GLDX can be volatile as highlighted by annualized volatility of 41.1%, according to issuer data.
The fourth addition to our list, VanEck Vectors Junior Gold Miners ETF (GDXJ), is an old standby among gold mining ETFs and it is one of this year’s best ETFs of any stripe with a gain of 74%. Only four non-leveraged ETFs, including the aforementioned SILJ and GLDX have outperformed GDXJ this year.
Home to $2.7 billion in assets under management, GDXJ is the second-largest gold miners ETF and is considered one of the bellwether funds in this market segment. Investors are responding to GDXJ as one of this year’s best ETFs as highlighted by inflows of more than $380 million.
Like its brethren, GDXJ is highly volatile with a three-year standard deviation of almost 51%. GDXJ charges 0.56% per year, or $56 for each $10,000 invested.
Finally, in an effort to have at least one ETF on this list that is not directly affected by rising precious metals prices, we turn to PowerShares S&P SmallCap Consumer Staples ETF (PSCC).
Up 15% year-to-date, PSCC does not sport some of the jaw-dropping gains of the aforementioned ETFs, but PSCC is still one of this year’s best ETFs at the sector level, and it is easily this year’s top consumer staples ETF.
PSCC is smaller than standard staples with just 15 holdings, but that stands to reason as this sector is dominated by large- and mega-cap stocks. Over the last three years, PSCC has been more volatile than large-cap staples ETFs, but less volatile than diversified small-cap ETFs.
As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.
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