Price is what investors pay and value is what they hope they are getting from a security, be it a bond, stock or exchange-traded fund (ETF). For some reason, many investors conflate price and value, assuming a stock or ETF with a high price tag lacks value while cheap ETFs are automatically good values.
That is not always the case, but there are examples of cheap ETFs that are worth considering. Nearly 280 ETFs, or more than 10% of the U.S.-listed exchange traded products universe, sport price tags of $20 or less. Some of these cheap ETFs have serious potential. Others do not.
For investors looking for what appear to be cheap ETFs, the good news is that funds with sub-$20 price tags span multiple asset classes, including bonds, commodities and stocks.
Penny-pinching and capital-starved investors are sure to like some of these cheap ETFs, all of which traded below $20 as of Wednesday afternoon.
Global X Future Analytics Tech ETF (AIQ)
Expense Ratio: 0.68% per year, or $68 on a $10,000 investment.
The Global X Future Analytics Tech ETF (NASDAQ:AIQ) is an example of a cheap ETF, at least by price tag, that is also a thematic fund focusing on a compelling market segment. In this case, that is aritifical intelligence (AI) and related fare, such as big data. AIQ, which debuted last May, tracks the Indxx Artificial Intelligence & Big Data Index.
While AIQ is a cheap ETF by price, the fund’s price-to-earnings ratio of just over 21 is a premium to broader equity benchmarks, but still reasonable among many thematic funds. That is very resonable when considering the massive growth potential in the AI market.
“According to one report, AI could contribute up to $15.7 trillion to global GDP in 2030, with $9.1 trillion coming from consumption-side effects and $6.6 trillion coming from increased productivity,” said Global X in a note out last year. “For context, that would add about 14% to global GDP, or more than China and India’s combined output.”
AIQ, which is up almost 20% this year, holds 80 stocks, over 60% of which are technology names.
SPDR Gold MiniShares Trust (GLDM)
Expense Ratio: 0.18%
As has been widely reported, the fee wars that have been so prominent in the ETF space over the years made their way to gold ETFs, meaning the SPDR Gold MiniShares Trust (NYSEARCA:GLDM) is a cheap ETF in more way than one. Not only is GLDM’s price tag low, it is one of the cheapest gold ETFs on the market.
“For many investors, costs associated with buying and selling the Shares in the secondary market and the payment of GLDM’s ongoing expenses will be lower than the costs associated with buying and selling gold bullion and storing and insuring gold bullion in a traditional allocated gold bullion account,” according to State Street.
GLDM proves investors like cheap ETFs, regardless of asset class. This fund debuted last June and has nearly $630 million in assets under management, making it one of the most successful ETFs to debut in 2019.
Global X Robotics & Artificial Intelligence ETF (BOTZ)
Expense Ratio: 0.68%
The days of being a sub-$20 ETF are probably numbered for the Global X Robotics & Artificial Intelligence ETF (NASDAQ:BOTZ), which is currently hovering just under that mark. That is still good enough to make one of the largest robotics ETFs cheap, by price tag anyway. BOTZ targets the Indxx Global Robotics & Artificial Intelligence Thematic Index.
Like the aforementioned AIQ, BOTZ and other robotics ETFs are thematic funds with exposure to a rapidly growing theme. Although robotics is a rapidly growing theme and the fund is up over 17% this year, BOTZ is not extended on valuation. China, the U.S. and Japan are among the world’s marquee robotics markets, a fact reflected in BOTZ as the fund devotes 78% of its weight to Japanese and U.S. stocks.
“The U.S. is the second largest robotics market, following China. And while the U.S. economy is entering late stage in the business cycle, capex growth is expected to remain robust in 2019 at approximately 8%-10% among US capital goods producers,” according to Global X research. “This suggests that manufacturers are keen to invest in new equipment, much of which is likely to be directed towards automation to reduce future expenses.”
Invesco High Yield Equity Dividend Achievers ETF (PEY)
Expense Ratio: 0.54%
Some cheap ETFs are dividend strategies, including the oft-overlooked Invesco High Yield Equity Dividend Achievers ETF (NASDAQ:PEY). PEY is a mix of a yield and dividend growth strategy and follows the Nasdaq U.S. Dividend Achievers Index.
While this cheap ETF’s roster of 50 is small compared to other domestic dividend funds, PEY does an admirable job of providing exposure to large-, mid- and small-caps. In fact, just over 46% of this cheap ETF’s roster is allocated to large-cap stocks, a small figure compared to many traditional dividend funds. PEY yields 3.9% over the last 12 months, driven in large part by a 45% combined weight to the utilities and consumer staples sectors.
This cheap ETF is also value play, as about 72% of its holdings are classified as value stocks. PEY also pays a monthly dividend.
Exponential Reverse Cap Weighted US Large Cap ETF (RVRS)
Expense Ratio: 0.29%
There are many ways to approach the S&P 500 via ETFs. Over the long term, the Exponential Reverse Cap Weighted U.S. Large Cap ETF (CBOE:RVRS) could prove to be one of the best. This cheap ETF’s approach is easy to understand: it takes the S&P 500 holdings and assigns the largest weights to the benchmark’s smallest companies.
RVRS follows the Reverse Cap Weighted U.S. Large Cap Index and features meaningfully different sector weights than the traditional S&P 500. For example, consumer discretionary is the largest sector weight in RVRS at 20.22%. That is more than double the weight assigned to that sector by the traditional S&P 500.
RVRS also mitigates stock-specific risk in superior fashion to the cap-weighted S&P 500. The largest holding in RVRS commands a weight of 1.07% compared to 3.7% in the S&P 500. Numbers do not lie. Year-to-date, RVRS is beating the S&P 500 by nearly 500 basis points and since inception, RVRS is beating the S&P 500 by more than 200 basis points.
As of this writing, Todd Shriber did not own any of the aforementioned securities.