Exchange-traded funds can be a useful tool for smoothing out the volatile gyrations of the stocks market by allowing you to buy into baskets of stocks, rather than betting on a single name. The converse of that, however, is that it’s a lot harder to pick an ETF that will be a runaway success. Just by their nature, the Best ETFs for 2019 contest entries have to work harder than their counterparts over in the Best Stocks contest to really stand out.
And so far, these ETFs are up to the challenge. While none of them have doubled anyone’s money, many have outperformed S&P 500 funds, such as the Vanguard S&P 500 ETF (NYSEARCA:VOO) and the top three funds so far have been battling for supremacy for the better part of the quarter.
Will these funds stay in the lead or will something else come up to challenge them? With a number of uncertain headline risks, it’s almost impossible to guess for certain. All we can say for certain is that no matter what the markets — and the headlines — decide to do, there’s probably at least one fund that can benefit big-time.
Here, in ascending order of year-to-date gains through the end of March, are this year Best ETFs contestants.
Best ETFs for 2019: SPDR Gold Trust (GLD)
Investor: Kent Thune
Expense Ratio: 0.4%
Year-to-Date Gains Through Q1: 1%
It’s not surprising that the SPDR Gold Trust (NYSEARCA:GLD) is lagging the rest of the field. Gold is traditionally thought of as a safe-haven commodity, and with the markets going gangbusters, many investors haven’t felt as strong a need to dip into safety as they might have in, say, the end of 2018. The ETF did have a pretty nice run into February, but has pretty much been treading water since then.
But there’s still a shine on this ETF — a shine that could get brighter if the outlook for the regular stocks gets a little dimmer. “Although there is no recession in sight in 2019, investors will soon begin to structure their portfolios for 2020,” wrote Thune. “This is because the stock market is a forward-looking, discounting mechanism, that tends to reflect the collective expectations of investors three to six months in advance.”
So if the markets start to waver, look for the GLD ETF to make a comeback in the Best ETFs contest.
iShares US Helathcare Providers ETF (IHF)
Investor: Todd Shriber
Expense Ratio: 0.43%
YTD Gains: 2%
The iShares U.S. Healthcare Providers ETF (NYSEARCA:IHF) has been looking sickly compared to most of the field so far. This isn’t solely at the feet of the constituent stocks, however. The XLV ETF suffered from a severe case of political headlines. On the one hand, there’s still plenty of talk about overpriced prescription medication, raising worries about the reliability of future revenues. And on the other, the Affordable Care Act has been under fire again, and there are a lot of questions about what the future of healthcare in the United States even looks like at this point.
All this is making things difficult for the XLV ETF. As Shriber put it, “Muddying the waters for stocks like UnitedHealth and funds such as IHF is talk among some analysts that although Wall Street does not expect Medicare For All to happen, investors should not expect a snapback rally in managed care stocks once it becomes apparent that single-payer healthcare will not take hold in the U.S.”
A little stability could go a long way to helping this fund get back in the race again.
iShares Mexico MSCI ETF (EWW)
Investor: Ian Bezek
Expense Ratio: 0.49%
YTD Gains: 6%
The iShares MSCI Mexico Capped ETF(NYSEARCA:EWW) may be lagging most of the field, and rumors of President Donald Trump perhaps closing the U.S./Mexico border could cause some serious pain, but investors should not despair just yet.
There are some tailwinds that should help lift the EWW. As Bezek wrote, “Despite political rumors that drove Mexican shares down sharply last year, its government and the Trump administration continue fostering closer relations. Meanwhile, the Federal Reserve’s easier monetary policy is likely to help boost all-important industrial production in Mexico.”
Can it catch up? We’re only one quarter through 2019, and it’s not like the fund is negative on the year. If politics don’t hamstring it, a turnaround is completely possible for the EWW ETF.
Financial Select Sector SPDR Fund (XLF)
Investor: Dana Blankenhorn
Expense Ratio: 0.13%
YTD Gains: 8%
The Financial Sector Spider ETF (NYSEARCA:XLF) hasn’t had a resoundingly positive start to the year. All the fears about a yield inversion have investors skirting around bank stocks, and deflation and banking disruption certainly haven’t helped.
“The weight of deflation on the global economy is increasing, not decreasing,” wrote Blankenhorn. “This directly impacts banking as fintech replaces traditional banking functions. Technology is lowering the cost of processing transactions and of evaluating and servicing loans and insurance policies. Fintech companies are bidding to replace banks entirely.”
Banking stocks are not out of it yet, but the current climate is not too kind to them — and those bank stocks make up over 40% of the fund’s holdings.
iShares Emerging Markets ETF (IEMG)
Investor: Jim Woods
Expense Ratio: 0.14%
YTD Gains: 10%
This entry and the following one in the Best ETFs contest both focus on the same segment of the market — emerging markets. And the iShares Core MSCI Emerging Markets ETF’s (NYSEARCA:IEMG) Q1 gain was frustrating, but not terrible.
“That said,” Woods wrote, “we must realize that Q1 performance in stocks was highly atypical, not just from a straight-up numbers standpoint, but also because the drivers that sent stocks soaring nearly across the board aren’t likely to be duplicated during Q2.”
Even if earnings stay good for the rest of 2019, it’s just going to be hard for stocks to continue making the sort of torrid gains during the rest of the year that they have in the first quarter. In the meantime, if the dollar’s strength backs off, that will benefit companies in other countries.
iShares MSCI Emerging Markets ETF (EEM)
Investor: Readers’ Choice
Expense Ratio: 0.69%
YTD Gains: 10%
Given all the headwinds that the trade war between China and the United States has put on the iShares MSCI Emerging Markets ETF (NYSEARCA:EEM), it’s not wholly surprising that it hasn’t quite matched the performance of the SPY. However, given that those headwinds haven’t yet KO-ed the EEM ETF, just imagine how well it could take off if those headwinds were to ease off.
As I recently wrote, there are other positives on the horizon. “Second, MSCI has decided to increase the weighting of Chinese stocks among its indexes. While the goal of a 3.3% share of the indexes doesn’t sound that big, remember that’s four times the current level. And MSCI isn’t the only one boosting investors’ access to these securities: the Bloomberg Barclays Global Aggregate Index will also be including Chinese companies starting next month.”
It’s not a leader yet, but the EEM ETF is hanging in there with the Best ETFs for 2019 front-runners so far.
iShares US Home Construction ETF (ITB)
Investor: Vince Martin
Expense Ratio: 0.43%
YTD Gains: 18%
As the United States economy continues cruising along, the iShares Dow Jones US Home Const. ETF (BATS:ITB), which focuses on home construction companies as the name implies, has been cruising as well. Not as well as the Best ETFs contest frontrunners, so far, but the year is still young.
The factors that have led to ITB performing well so far this year, however, have maybe been a little surprising to some investors. As Martin put it, “The case for ITB was that even if new home sales stayed soft, a strong economy would lift renovation and remodeling spending. Yet it has been ITB’s exposure to new construction, not R&R, that has driven a majority of its gains so far.”
So imagine how the ITB ETF could do if the remodeling and renovation dollars start flowing in as well. It has stayed within striking distance of the leaders, and a little boost may be all it needs.
Global X Robotics & Artificial Intelligence Thematic ETF (BOTZ)
Investor: Tom Taulli
Expense Ratio: 0.68%
YTD Gains: 20%
The Global X Robotics & Artificial Intelligence Thematic ETF (NASDAQ:BOTZ) has been full of winners so far this year — in fact, as of March 25, only two of the fund’s 37 holdings were in the red for 2019 thus far. But the real attraction here is the long growth runway that lies ahead of the BOTZ ETF.
According to Taulli, “When it comes to AI and robotics, I think there should be a long-term focus. The fact is that these industries are quite volatile and highly competitive, with huge players like Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG), Microsoft (NASDAQ:MSFT) and Facebook (NASDAQ:FB).”
That means that investors should hold on tight because the 2019 ride could be bumpy. But the growth drivers that are powering the fund aren’t going away, and the potential for big volatility also means the potential for big gains. The BOTZ ETF is going to be one to watch as the contest continues.
Invesco Water Resources ETF (PHO)
Investor: James Brumley
Expense Ratio: 0.62%
YTD Gains: 21%
Water is vital to our lives in a fundamental way, and the Powershares Water Resource Portfolio (NASDAQ:PHO) allows investors to invest in that — and reap rewards of 20% in just three months.
But while the first quarter results were great, what’s even better is that it looks like they may be able to continue “The performance of the Powershares Water Resource Portfolio isn’t the most compelling aspect of PHO stock here, however. It’s that the fund’s constituents have been so uniformly bullish of late after a couple clunkers took a big toll on last year’s bottom line.”
As we move toward a world where the companies that the PHO ETF holds will be in greater and greater demand, hopefully it will see more and more growth through the rest of the Best ETFs of 2019 contest.
Pacer Benchmark Data & Infrastructure Real Estate ETF (SRVR)
Investor: Robert Waldo
Expense Ratio: 0.6%
YTD Gains: 21%
After the first quarter, the Pacer Benchmark Data & Infrastructure Real Estate ETF (NYSEARCA:SRVR) has taken the top spot. It was a fight, but the tech sector — and specifically, the growing tailwind of 5G’s approach — gave SRVR the edge.
You probably know 5G as the next step in data speed. According to Waldo, “To get an idea of how fast 5G is compared to 4G LTE, consider that 4G LTE’s top speed is 1GB per second, while 5G will have a top speed of 20 GB per second — a 2,000% increase!”
With our increasingly connected word, this boost in speed is going to change a lot in the coming years. But if you’re not sold on all of the individual companies that are looking ahead to 5G, don’t worry. The SRVR ETF isn’t really a play on 5G in that way.
As Waldo put it, “But as hype-worthy of a trend as 5G may be, that’s not all that SRVR has going for it. In fact, part of my decision to pick this fund for our best ETFs contest was that it’s a real estate investment trust (REIT) ETF. This means its holdings own data centers and fiber that are vital to the 5G rollout, but are also necessary for all of our current, general tech-related luxuries like the cloud.”
So SRVR took the top spot, and seems well positioned to try to defend it for the rest of 2019.
Jessica Loder is an assistant editor at InvestorPlace.com. As of this writing, she did not hold a position in any of the aforementioned securities.