When compiling a list of the best ETFs of the month, the first twenty or so will undoubtedly be double- or triple-leveraged funds. But what happens when you exclude these funds from the list and focus solely on more standard exchange-traded funds? After all, these leveraged funds involve significantly higher risk and their default nature gives them an upper hand in performance … in a way, they’re “cheaters.”
After excluding leveraged funds, the list of best performing ETFs for the month still becomes rather narrow and risky; mainly involving specific emerging markets and biotech ETFs. But there are still a few outliers to take note of.
And while it is yet to be determined if any of these ETFs continue their bombastic performances in the months ahead, they’re undoubtedly off to a good start in 2018 and they all show significant long-term promise.
In no specific order, here are the ten best ETFs of January 2018 (excluding leveraged funds).
Best ETFs of January: Loncar Cancer Immunotherapy ETF (CNCR)
Expense Ratio: 0.79%, or $79 annually per $10,000 invested
Year-to-Date Gains: 21% vs 5.5% for the S&P 500
Loncar Cancer Immunotherapy ETF (NASDAQ:CNCR) starts this list of best ETFs. This fund outperformed the S&P 500 by more than 15% in January. The CNCR ETF tracks the Loncar Cancer Immunotherapy Index, which currently consists of 30 stocks that focus on cancer research and treatment.
Top holdings like Adaptimmune Therapeutics PLC – ADR (NASDAQ:ADAP) and Bristol-Myers Squibb Co (NYSE:BMY) meet the fund’s specific requirements that its holdings have 1) cancer immunotherapy drugs approved the FDA or EMA; 2) cancer immunotherapy drugs in human testing stages; 3) a goal to start human testing of a cancer immunotherapy drug; and/or 4) a partnership with another company that focuses on immunotherapy.
CNCR is one of the best ETFs for those that want exposure to biotech stocks, but don’t mind a narrower emphasis on companies involved in various cancer treatments — a cause that will not lose its importance in the foreseeable future.
Best ETFs of January: Global X MSCI Nigeria ETF (NGE)
Expense Ratio: 1.10%
YTD Gains: 19.4%
Next on the list is a frontier market ETF: Global X MSCI Nigeria ETF (NYSEARCA:NGE).
The NGE ETF consists of the largest companies in Nigeria. It should be no surprise to see a frontier market ETF on this list of best ETFs. The extreme growth aspect of such funds lends to their performance, but also to significant risks.
Insular exposure to Nigeria gives investors access to companies based in an economy that “has the potential to move eight places up the GDP rankings to 14th by 2050.”
Although it is not the fastest growing economy — contrary to previous forecasts — NGE’s obscure holdings like Nigerian Breweries PLC and Nestle Nigeria PLC are helping boost its performance over other lesser-known markets at the start of 2018.
Best ETFs of January: Franklin FTSE Brazil ETF (FLBR)
Expense Ratio: 0.19%
YTD Gains: 15%
Nigeria is a standout frontier market in 2018 so far, but what about emerging markets? These markets are more developed than frontier markets but still not as established as developed markets.
A few emerging market ETFs make the list of best ETFs in January 2018, the first one being the Franklin FTSE Brazil ETF (NYSEARCA:FLBR). This fund follows the FTSE Brazil Capped Index, which includes large and mid-cap Brazilian stocks like raw materials producer Vale SA (ADR) (NYSE:VALE) and commercial bank Banco Bradesco SA (ADR) (NYSE:BBD).
Although the Brazilian market offers plenty of growth potential — as seen with FLBR’s standout performance over the S&P 500 in 2018 — it is still susceptible to significant risk. The country is notorious for its political corruption, which can ultimately bear down on the success of its companies.
Best ETFs of January: iShares S&P Latin America 40 ETF (ILF)
Expense Ratio: 0.49%
YTD Gains: 14%
In case you haven’t noticed, most of the best ETFs in January focus on very narrow spaces of the market. The iShares S&P Latin America 40 Index (ETF) (NYSEARCA:ILF) continues this trend as an ETF that focuses solely on stocks based in Latin American markets. It is distinct from FLBR, however, in that it doesn’t focus on stocks from single country, but an entire region.
With ILF, investors get exposure to the 40 largest Lain American stocks, which gives the benefit of owning well-established companies based in some of the most enticing emerging markets. A large portion of this fund is allocated towards Brazilian stocks (60%), but Mexican (23%) and Chilean (12%) stocks also have a notable presence. Furthermore, the fund is based heavily in the financials sector (37%), but materials (17%), consumer staples (14%) and energy 13%) also get some love.
With that breakdown in mind, top holdings consist of names like big-time energy play Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR), Latin American telcom America Movil SAB de CV (ADR) (NYSE:AMX) and holding company Fomento Economico Mexicano SAB (ADR) (NYSE:FMX).
Best ETFs of January: Virtus LifeSci Biotech Clinical Trials ETF (BBC)
Expense Ratio: 0.79%
YTD Gains: 20%
The Virtus LifeSci Biotech Clinical Trials ETF (NYSEARCA:BBC) is another standout biotech ETF that has had significant success at the start of 2018. Although there are a few biotech ETFs on this list, none are quite like BBC, which focuses specifically on biotech companies with their lead drugs in the clinical trial stage of development.
Essentially, this fund cuts out the dirty work of having to identify several biotech stocks on the verge of exponential growth based — ideally — on the approval of their premier drug. That means you still get the theoretical growth benefits of biotechs, while not having to wait for their primary drugs to enter the trail phase of testing.
Best ETFs of January: iShares China Large-Cap ETF (FXI)
Expense Ratio: 0.74%
YTD Gains: 14%
Among the largest emerging markets, China is at the top of many investors’ lists. And the iShares FTSE/Xinhua China 25 Index (ETF) (NYSEARCA:FXI) is among the best ETFs that emphasizes this space.
Specifically, the FXI ETF aims to grant investors access to a collection of large-cap Chinese stocks, which are still “under-owned” thanks to varying controversies the country has faced over the years.
Up more than 10% in January, the ETF gets its boost from top holdings like Chinese investment company Tencent Holdings Ltd (OTCMKTS:TCEHY) and telecommunications name China Mobile Ltd. (ADR) (NYSE:CHL).
Best ETFs of January: iShares MSCI Brazil Capped ETF (EWZ)
Expense Ratio: 0.62%
YTD Gains: 16%
As the second Brazilian-based ETF on this list of best ETFs, the iShares MSCI Brazil Index (ETF) (NYSEARCA:EWZ) isn’t too distinct from the earlier mentioned FLBR ETF.
Similar to FLBR, EWZ focuses on large and mid-sized companies in Brazil. As such, it has similar overall performance. There are minor differences, however, that might be worth noting if you’re a stickler for details.
For example, EWZ — started in July 2000 — has been around much longer than FLBR, which started just last year. Furthermore, the number of holdings in EWZ is less at 55 versus the 70-plus holdings in the Franklin Brazilian-based ETF.
Best ETFs of January: ARK Genomic Revolution Multi-Sector ETF (ARKG)
Expense Ratio: 0.75%
YTD Gains: 16.5%
We return to the biotech space with the next fund on this list of best ETFs.
The ARK Genomic Revolution Multi-Sector ETF (NYSEARCA:ARKG) has an insular focus on companies involved in genomic sequencing. So far, this focus has paid off, as the fund has outperformed the broader market by more than 10% at the start of 2018.
More specifically, the goal of this actively managed fund is “long-term growth of capital” through a collection of stocks from multiple sectors, all of which focus on the genomics revolution. Broadly explained, genomics is gene mapping and it “is revolutionizing how biological information is collected, processed, and applied by reducing guesswork and enhancing precision; restructuring health care, agriculture, pharmaceuticals and enhancing our quality of life.”
Among ARKG ‘s top holdings are genome editing companies like Intellia Therapeutics Inc (NASDAQ:NTLA) (with a 9% distribution), Editas Medicine Inc (NASDAQ:EDIT) and Illumina, Inc. (NASDAQ:ILMN) (each with 7% allocations).
Best ETFs of January: Global X China Financials ETF (CHIX)
Expense Ratio: 0.65%
YTD Gains: 12%
With FXI, we’ve already seen that a general Chinese-based ETF has established itself as one of the best ETFs in 2018 so far, but an even more niche Chinese ETF is also performing very well: Global X China Financials ETF (NYSEARCA:CHIX).
As CHIX’s namesake suggests, this is an ETF that focuses on Chinese financial stocks. In other words, those who are looking for singular exposure to China, but want to make things even more granular by focusing on a specific sector — financials and real estate — should find themselves at home with this fund.
Top holdings include AIA Group Ltd. (OTCMKTS:AAIGF), China Construction Bank and Bank of China.
Best ETFs of January: First Trust Amex Biotechnology Index (FBT)
Expense Ratio: 0.56%
YTD Gains: 15%
The final fund on this list of best ETFs is yet another biotech name: First Trust Amex Biotechnology Index (FBT) (NYSEARCA:FBT).
Compared to the other biotech ETFs on this list, FBT is far more broad in its scope. Instead of focusing on a particular theme, it contains companies “that are primarily involved in the use of biological processes to develop products or provide services.”
What all of this equates to is an ETF that holds many of the same stocks as the other biotechs on the list (for example, Juno Therapeutics) as well as other names like Acadia Pharmaceuticals Inc. (NASDAQ:ACAD).
Of course, the general risk/reward of owning biotechs is packed into this fund, but the fact that FBT doesn’t have as narrow of a focus as others may give it the upper hand in terms of stability (but also less overall room for massive growth).
Robert Waldo is an Assistant Editor at InvestorPlace. As of this writing, he did not hold a position in any of the aforementioned securities.