Exchange traded funds (ETFs), which invest in a basket of securities or other asset classes, have been getting increased investor attention. The first ETF, the SPDR S&P 500 ETF Trust (NYSEARCA:SPY), began trading in January 1993. Now there are more than 2,200 ETFs in the U.S. alone.
Today we’ll look at some ETFs that have been clear winners since the start of 2021. I believe these funds are likely to deliver returns in the coming quarters, too. I’ve excluded leveraged and inverse ETFs from this list; those would be more appropriate as short-term trades, rather than long-term investments.
ETFs can make investing less complicated for many individuals. Several of the ETFs mentioned here might even possibly inspire InvestorPlace readers to put together long-term diversified portfolios within their risk/return parameters. Hopefully, this article also reminds investors of the importance of diversification.
These are 7 of the best ETFs so far in 2021:
- Ark Autonomous Technology & Robotics ETF (BATS:ARKQ)
- Arrow Dow Jones Global Yield ETF (NYSEARCA:GYLD)
- ETFMG Treatments, Testing and Advancements ETF (NYSEARCA:GERM)
- iShares U.S. Infrastructure ETF (BATS:IFRA)
- Schwab U.S. Large-Cap Growth ETF (NYSEARCA:SCHG)
- SPDR S&P Homebuilders ETF (NYSEARCA:XHB)
- VanEck Vectors Rare Earth/Strategic Metals ETF (NYSEARCA:REMX)
Well-managed companies with robust stories typically have solid good returns in the long-run, but it won’t always be a smooth ride. Therefore, retail investors should have a long-term view.
ETFs: ARK Autonomous Technology & Robotics ETF (ARKQ)
52-Week Range: $35.42 — $101.11
YTD % Change: 11.21%
Expense Ratio: 0.75 % per year
The ARK Autonomous Technology & Robotics ETF invests in businesses that develop, produce or enable autonomous transportation, robotics, automation, 3D printing, energy storage and space exploration. ARKQ typically holds between 30 and 50 holdings and currently includes 48 names. The top ten account for approximately 50% of total net assets, close to $3.33 billion.
ARKQ’s top five companies are Tesla (NASDAQ:TSLA), technology solutions provider Trimble (NASDAQ:TRMB), Chinese Internet search provider Baidu (NASDAQ:BIDU), U.S. national security firm Kratos Defence & Security Solutions (NASDAQ:KTOS), and Google’s Alphabet (NASDAQ:GOOG,GOOGL).
The fund hit an all-time high in mid-February, and has returned over 130% within the past one year. It is important to note that Tesla’s weighting within this ETF is over 10%, so daily movement in TSLA shares affects the price of ARKQ. In case of a price decline below the $80 level, long-term investors may find better value in the fund.
Arrow Dow Jones Global Yield ETF (GYLD)
52-Week Range: $10.00 — $15.05
YTD % Change: 10.01%
Dividend Yield: 5.54%
Expense Ratio: 0.75% per year
Our next ETF, which has a global focus, could appeal to passive-income seekers. The Arrow Dow Jones Global Yield ETF gives equally-weighted exposure to five asset classes worldwide: equity, real estate investment trusts (REITs), alternatives (including energy and master limited partnerships, MLPs), corporate debt and sovereign debt.
GYLD has 150 holdings, typically 30 from each asset class. It tracks the Dow Jones Global Composite Yield Total Return Index, which is balanced quarterly. The fund started trading in August 2012 and assets under management are now almost $41 million.
The fund offers a basket of five categories with a worldwide focus. Current exposure to the five asset classes is as follows:
- Global Real Estate: 20.30%
- Global Alternative: 20.12%
- Global Sovereign Debt: 20.01%
- Global Corporate Debt: 19.94%
- Global Equity: 19.63%
Under alternatives and equities, we find names like Shell Midstream Partners (NYSE:SHLX), NuStar Energy (NYSE:NS), DCP Midstream (NYSE:DCP), Severstal’ PAO (OTCMKTS:SVJTL), Yanzhou Coal Mining (OTCMKTS:YZCAY), and Kumba Iron Ore (OTCMKTS:KIROY).
Corporate bonds come from mainly U.S. companies, including PBF Energy (NYSE:PBF), DCP Midstream LP (NYSE:DCP), Western Midstream Partners (NYSE:WES), MGM Resorts International (NYSE:MGM), and Encompass Health (NYSE:EHC).
Finally, sovereign debt has been issued by numerous countries, including Brazil, Chile, Colombia, Hungary, Indonesia, Israel, Mexico, Panama, Peru, South Africa, and Turkey. Those sovereigns typically pay more than developed economies.
Within a diversified portfolio, some investors could consider a small allocation toward GYLD.
ETFMG Treatments, Testing and Advancements ETF (GERM)
52-week range: $23.80 — $44.69
YTD % Change: 19.36%
Expense ratio: 0.68% per year
The ETFMG Treatments, Testing and Advancements ETF comprises biopharma businesses that are developing vaccines or other cures, as well as diagnostic technology against infectious diseases. GERM started trading in June 2020. Although most investors would understandably put Covid-19 at the center of such diseases, there are currently over 20 epidemic diseases worldwide.
Thus, the work done by these firms or other newcomers will not end despite the fact that we have several vaccines against the virus. According to a report by MarketsandMarkets, “The global vaccines market is projected to reach USD 58.4 billion by 2024 from USD 41.7 billion in 2019, at a CAGR of 7.0% during the forecast period.”
GERM, which has 77 holdings, follows the Prime Treatments, Testing and Advancements Index. The top ten businesses make up about 55% of the fund’s net assets (over $58 million).
BioNTech (NASDAQ:BNTX) and Moderna (NASDAQ:MRNA), which have become household names, are the top two names in the roster. Next in line are the diagnostic test manufacturer Quidel (NASDAQ:QDEL), life sciences groups Laboratory Corporation of America (NYSE:LH), and Bio-Rad Laboratories (NYSE:BIO).
Additionally, shares of other companies working on a COVID-19 cure are included in GERM. They include: Novavax (NASDAQ:NVAX), CureVac (NASDAQ:CVAC), Zai Lab (NASDAQ:ZLAB), Quest Diagnostics (NYSE:DGX) and Abcellera Biologics (NASDAQ:ABCL).
YTD, the fund is up over 19% and hit a new high of $44.69 in February 2021. Interested investors might consider buying the dips.
iShares U.S. Infrastructure ETF (IFRA)
52-week range: $19.54 — $35.76
YTD % Change: 18.71%
Dividend Yield: 1.75%
Expense ratio: 0.40% per year
President Biden’s plans to increase spending on building roads, tunnels, bridges, and other infrastructure projects have already started benefiting firms in this segment. The iShares U.S. Infrastructure ETF invests U.S.-based firms likely to benefit from increased infrastructure activities. The fund started trading in April 2018.
IFRA has 153 holdings and tracks the NYSE FactSet U.S. Infrastructure Index. The top ten firms weigh only about 8% in the net assets of $437.5 million, so no single company can significantly influence ETF’s price by itself.
Water utility company York Water (NASDAQ:OLN), domestic and international rail operations firm Kansas City Southern (NYSE:KSU), integrated energy company Entergy (NYSE:ETR), water and wastewater utility firm American Water Works Company (NYSE:AWK), regulated water utility and wastewater systems operator Middlesex Water (NASDAQ:MSEX), and natural gas distributor NiSource (NYSE:NI) are the leading names in the fund.
IFRA has returned 71.32% in the past 52 weeks. Trailing P/E and P/B ratios are 23.79 and 2.33, respectively. Investors in infrastructure stocks typically look for passive income and capital appreciation. A potential decline toward $33 would improve the margin of safety for long-term investors.
Schwab US Large-Cap Growth ETF (SCHG)
52-Week Range: $84.76 — $140.87
YTD % Change: 9.45%
Dividend Yield: 0.57%
Expense Ratio: 0.04% per year
Our next fund is the Schwab U.S. Large-Cap Growth ETF that invests in U.S.-based large-cap growth stocks. While the definition of large-caps may vary slightly across brokerages, a company with a market capitalization of more than $10 billion is typically considered a large-cap business. More than 75% of the companies in the fund have markets caps above $70 billion.
SCHG, which tracks the Dow Jones U.S. Large-Cap Growth Total Stock Market Index, has 235 holdings. The fund started trading in November 2009 and assets under management stand at $14.6 billion.
In terms of sectors, information technology (IT) has the highest weighting (45.38%), followed by Consumer Discretionary (16.65%), Communication Services (14.93%), Health Care (12.31%) and Industrials (3.54%).
The top 10 holdings make up around 52% of the fund. Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) lead the fund with 11.77% and 10.94% stakes, respectively. Other heavyweights include Amazon (NASDAQ:AMZN), Facebook (NASDAQ:FB), Alphabet and Tesla.
In the past year, SCHG has returned about 60%. Trailing P/E and P/B ratios are 42.93 and 9.55, respectively, putting the valuation on the frothy side. A potential decline toward $130 would improve the margin of safety.
SPDR S&P Homebuilders ETF (XHB)
52-week range: $30.63 — $75.34
YTD % Change: 30.31%
Dividend Yield: 0.72%
Expense ratio: 0.35% per year
U.S. housing metrics released in recent months have encouraged investors, as Housing Starts, Building Permits and Existing Home Sales all have been strong. Despite the economic uncertainties amid the novel coronavirus pandemic, the residential construction statistics released jointly by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development also demonstrate the health and resiliency of the housing sector.
The SPDR S&P Homebuilders ETF, which has 35 holdings, tracks the S&P Homebuilders Select Industry index. Assets under management stand at $1.9 billion. XHB’s sub-industry allocation centers around Building Products (38.26%), Homebuilding (31.62%) and Home Improvement Retail (11.44%).
This ETF provides exposure across large-, mid-, and small-cap stocks, each with a weighting between 4% and 5% and top ten companies make up around 40% of the fund. The top three companies in the fund are retailer in the home furnishings marketplace RH (NYSE:RH), multi-channel specialty home products retailer Williams-Sonoma (NYSE:WSM) and home improvement company Lowe’s Companies (NYSE:LOW).
XHB price has gone up over 140% in the past 52 weeks. It has recently hit an all-time high. Long-term investors may consider buying the fund, especially if XHB comes under short-term pressure and slides below $70.
VanEck Vectors Rare Earth/Strategic Metals ETF (REMX)
52-Week Range: $28.01 — $93.84
YTD % Change: 19.39%
Dividend Yield: 0.68%
Expense Ratio: 0.57% per year
The VanEck Vectors Rare Earth/Strategic Metals ETF invests in firms that produce, refine or recycle rare earth and strategic metals and minerals. Most of us would find it difficult to recognize many of these metals or minerals. From the periodic table, they include names like cerium (Ce), europium (Eu), lanthanum (La), neodymium (Nd), promethium (Pm) and samarium (Sm).
In addition, the U.S. Geological Survey lists 35 mineral commodities as critical for the functioning of the economy. Consumers shopping for smartphones, flat-panel televisions, electric vehicle (EV) batteries or next-generation light bulbs would be interested in knowing that REEs or strategic metals are typically used in these products.
Recent research by Rajive Ganguli and Douglas R. Cook of the Mineral Industry Research Laboratory, University of Alaska Fairbanks, Alaska, highlights “Though rare earths are present in most parts of the world, they are produced mostly in China.”
REMX, which has 20 holdings, started trading in October 2010. The fund tracks the returns of the MVIS Global Rare Earth/Strategic Metals TR Net index, which is balanced quarterly. Total net assets are $653.4 million.
China-based companies head the ETF roster with 42.39%, followed by Australia (26.28%) and the U.S. (15.14%). The 10 largest stocks constitute nearly 60% of the fund. Leading names include Zhejiang Huayou Cobalt, China Molybdenum (OTCMKTS:CMCLF), Lynas Rare Earths (OTCMKTS:LYSDY), China Northern Rare Earth Group High-Tech, and Shenghe Resources.
Along with our reliance on high-tech products, the importance of this niche sector is growing. In the past 52 weeks, REMX has returned about 167%. A potential decline toward $72.5 would improve the risk/return profile for long-term investors.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all three levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.