Exchange-traded funds (ETFs) are often aimed at conservative investors with long-term time horizons. Many of the largest ETFs on the market today are designed to provide cost-effective exposure to basic asset classes, such as domestic stocks, international equities and high-grade government bonds.
Another selling point of a slew of ETFs to buy is that these funds feature broad lineups of stocks, a strategy that reduces concentration risk while eliminating the need for stock picking. Bottom line: may of the top ETFs to buy are inexpensive and easy to understand, selling points that were the foundation of the ETF industry two decades ago and traits that are likely to continue driving the industry’s exponential growth.
However, the ETF business is evolving and that evolution has led to the introductions of products aimed at more risk-tolerant traders and investors. Some of the better ETFs to buy for more adventurous investors include thematic funds while others are designed to be more tactical in nature.
Put it this way: if you’re an investor with an adventurous spirit, there are plenty of ETFs to buy, but in many cases, that does not mean an investor should take on high levels of risk for extended periods of time. For investors looking to juice their returns or simply take on some added risk, here are some ETFs to buy.
Best ETFs to Buy for Gamblers: ProShares UltraShort QQQ (QID)
Expense Ratio: 0.95% per year, or $95 on a $10,000 investment.
The ProShares UltraShort QQQ (NYSEARCA:QID) is designed to deliver double the daily inverse returns of the widely followed Nasdaq-100 Index, so if that index declines by 1% on a particular day, QID should rise by 2%.
In other words, QID is a bad ETF to buy when the Nasdaq-100 is going up, something that tech-heavy benchmark has made a habit of doing over the course of the past decade. The current market environment clearly favors growth and technology stocks, two of the fortes of the Nasdaq-100, making QID an ETF to buy for contrarians or those looking to hedge long positions in Nasdaq-100 funds.
In either case, investors should note QID and other leveraged ETFs are intended for short-term traders, not to be held for long holding periods, because the longer a leveraged ETF like QID is held, the more the chances increase that the fund will deviate from its stated objective.
Interestingly, market participants have added nearly $181 million to QID this year.
Global X MSCI Greece ETF (GREK)
Expense Ratio: 0.59%
The Global X MSCI Greece ETF (NYSEARCA:GREK) is the only U.S.-listed ETF dedicated to Greek equities. After years of being saddled by austerity measures and borrowing billions from the International Monetary Fund (IMF) and the European Union (EU), Greece is finally on the right fiscal path.
GREK is up nearly 22% year-to-date, indicating investors view this as an ETF to buy.
“In Q1, the markets were up 15.2% and forecasts put 2019 GDP growth at annualized 2.4%, versus Europe at just 1.3%,” said Global X in a recent research note. “Greece’s improving growth prospects could portend the start of a virtuous cycle for Greece, making it a standout against the weak backdrop of a sluggish Europe.”
What makes GREK a risky ETF to buy is, among other factors, a standard deviation of 24%, which is well above the comparable metric on emerging markets and Eurozone benchmarks. Those are relevant comparisons because Greece is a Eurozone member and classified as an emerging market.
VanEck Vectors Junior Gold Miners ETF (GDXJ)
Expense Ratio: 0.53%
Among risky industry and sector ETFs to buy, mining funds are certainly part of that conversation and precious metals mining funds, such as the VanEck Vectors Junior Gold Miners ETF (NYSEARCA:GDXJ) are among the best ETFs to buy for risk-tolerant investors.
GDXJ is a fine ETF to buy for an active, risk-aware trader looking to make a bet on rising gold prices. One of the risks, however, with gold mining ETFs is that the funds are not always responsive to higher bullion prices. Amplifying the risk profile is that when gold prices decline, shares of miners often overshoot spot gold’s declines.
Add all that into the wrapper of a small-cap fund and GDXJ is a volatile ETF to buy. The fund’s standard deviation of more than 31% is well above that of basic gold funds and traditional small-cap ETFs.
iPath Global Carbon ETN (GRN)
Expense Ratio: 0.75%
The iPath Global Carbon ETN (NYSEARCA:GRN) definitely is not a good ETF for all investors. This niche, lightly traded exchange-traded note (ETN) tracks the Barclays Global Carbon II TR USD Index.
That index “is designed to measure the performance of the most liquid carbon-related credit plans. Each carbon-related credit plan included in the index is represented by the most liquid instrument available in the marketplace. The index expects to incorporate new carbon-related credit plans as they develop around the world,” according to the issuer.
While GRN has low correlations to traditional asset classes, the fund is not for conservative investors due to its history of high volatility. Not to mention, most investors can live without carbon credits in their portfolios.
SPDR S&P Oil & Gas Exploration & Production ETF (XOP)
Expense Ratio: 0.35%
For adventurous investors looking for energy sector exposure, the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEARCA:XOP) is one of the best ETFs to buy. XOP can be great when oil prices are trending higher because exploration and production stocks are typically more correlated to crude prices than integrated oil companies.
XOP does come with the disclaimer that, as is the case throughout financial markets, there is no such thing as a free lunch. Compared to traditional energy funds that are heavily allocated to stocks like Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX), XOP is significantly more volatile.
The added volatility gets compounded when oil prices decline. When that happens, XOP and rival exploration and production ETFs often produce losses that far exceed those of basic energy ETFs.
Direxion Daily S&P Biotech Bull 3X Shares (LABU)
Expense Ratio: 1.12%
Like the aforementioned QID, the Direxion Daily S&P Biotech Bull 3X Shares (NYSEARCA:LABU). In the case of LABU, this leveraged funds tries to deliver triple the daily returns of the S&P Biotechnology Select Industry Index, so if that index rises by 1% on a particular day, LABU should jump by 3%.
LABU is one of the best ETFs for risk tolerant because it amplifies the combination of biotechnology and volatility. Data confirm as much. Over the past month, LABU is one of Direxion’s most volatile bullish leveraged ETFs, a status LABU frequently attains.
LABU is also one of the best ETFs for aggressive traders to deploy during biotechnology earnings season and around news events such as drug approvals and industry consolidation. What that means is traders should treat LABU like the short-term instrument it is.
VanEck Vectors ChinaAMC SME-ChiNext ETF (CNXT)
Expense Ratio: 0.65%
Chinese small-caps probably are not the asset class for your retirement portfolio, but the VanEck Vectors ChinaAMC SME-ChiNext ETF (NYSEARCA:CNXT) is one of the best ETFs for investors seeking tactical exposure to the world’s second-largest economy. CNXT fills some useful voids in international portfolios because many traditional China funds focus on large caps whereas this fund focuses on mid- and small-cap stocks.
CNXT’s underlying index “tracks the performance of the 100 largest and most liquid China A-share stocks listed and trading on the Small and Medium Enterprise (“SME”) Board and the ChiNext Board of the Shenzhen Stock Exchange,” according to VanEck.
The weighted average market value of CNXT’s 100 holdings is $12.8 billion, putting the fund just inside large-cap territory, but that number is still well below the average market caps found on holdings in traditional China ETFs.
CNXT can be a bumpy ride. The fund is up 20% year-to-date, but that’s after shedding 18% over the past month.
As of this writing, Todd Shriber does not own any of the aforementioned securities.