After a wild first six months of 2022, investors are now focused on adjusting their portfolios for the remainder of the year, and one way they’re doing that is via exchange-traded funds (ETFs). To maximize profitability potential while maintaining stability, market participants ought to consider the best ETFs to buy now.
While picking an individual winner provides the most exciting opportunities in the equities sector, it’s also extremely difficult to do consistently. To lever the odds in your favor, the ETF represents an ideal option. Rather than being completely levered to the ebb and flow of single-stock ideas, the best ETFs to buy give you a broad canvas of potential upside opportunities.
In other words, the best ETFs to buy are wagers on themes rather than which specific brand will win out. Therefore, if you believe that the energy or defense sectors will become more relevant due to geopolitical tensions, broad-based funds give you a higher probability of success than merely banking on a single company.
Of course, even the best ETFs to buy now mitigate maximum upside potential. For that, you’ll probably need to go with a single-stock idea. But for those who are concerned about volatility, these funds bring balance and capital return potential to the table.
|IXC||iShares Global Energy ETF||$32.22|
|ITA||SPDR S&P Aerospace & Defense ETF||$97.90|
|DBA||Invesco DB Agriculture Fund||$19.94|
|FIW||First Trust Water||$71.54|
|SDIV||Global X SuperDividend ETF||$8.93|
|SPLV||Invesco S&P 500 Low Volatility ETF||$61.47|
|VPU||Vanguard Utilities ETF||$150.81|
iShares Global Energy ETF (IXC)
Although the hydrocarbon energy market was one of the biggest winners in the first half of 2022 due to Russia’s invasion of Ukraine, the sector has softened considerably in the trailing month. Part of the reason is the U.S. selling up to 45 million barrels of oil from the Strategic Petroleum Reserve. Another major component is the Federal Reserve, which is committed to combating inflation.
To do this, the Fed will raise the benchmark interest rate, which will naturally raise borrowing costs. However, such an action will slow down business activity, threatening a recession. If so, the narrative seemingly doesn’t help the iShares Global Energy ETF (NYSEARCA:IXC). Still, give it a few months and the IXC could easily become one of the best ETFs to buy.
Though current conditions don’t support hydrocarbon prices, the reality is that fossil fuels power the global economy. Transitions toward alternative energy sources will take time. Once this realization kicks in again, IXC could jump higher from where it is. Of course, the best opportunity comes by jumping in early before the wave comes in.
SPDR S&P Aerospace & Defense ETF (ITA)
When Russia converted its show of force into actual force in late February of this year, it took the global community — and arguably some Kremlin insiders — by surprise. Despite overwhelming odds, Ukrainian forces repelled the attempt to take control of Kyiv. Now, the fighting has centered on Ukraine’s eastern and southern borders.
While it’s difficult to understand the true nature of the fighting due to the fog of war, many experts have cautioned that the crisis could last for years. That means that Western powers may have little choice but to support Ukraine militarily for as long as it takes, which cynically boosts the case for the SPDR S&P Aerospace & Defense ETF (BATS:ITA).
The issue with just letting things be is that such apathy would then normalize the policy of might makes right. In turn, that may embolden China to take over Taiwan, which is absolutely pivotal to the manufacturing of advanced semiconductors.
In other words, credibility of freedom and democracy is on the line, which makes ITA realistically one of the best ETFs to buy now.
Invesco DB Agriculture Fund (DBA)
Another factor that should not be ignored in the eastern European conflict is the vulnerability of the global food supply chain. From 2019 to 2020, Ukraine reached 54.9 million metric tons of wheat, corn and barley exports. On the other hand, Russian wheat production for the 2021/2022 crop year was estimated at 85 million metric tons.
Both are major powers in the agricultural sector. With these two duking it out, the conflict disrupts the usual flow of food sources, threatening widespread hunger. As well, Russia is a major producer of fertilizer, which adds even more complexity to the food equation. That’s why Invesco DB Agriculture Fund (NYSEARCA:DBA) is one of the best ETFs to buy now.
Yes, it’s hurting right now, having shed almost 10% on a trailing-month basis through the July 13 session. Economic concerns and the soaring inflation rate are weighing on agricultural and other commodities-related segments. Still, sheer necessity and relevance bode cynically well for the DBA ETF.
First Trust Water (FIW)
One of the most pronounced effects of climate change is the subsequent global water shortage. Back home, media sources have consistently reported on the drought that has affected California and other southwestern states. As well, the Washington Post recently reported on a water crisis in South Africa.
If the widespread nature of water shortages wasn’t enough to get your attention, the BBC reported that reduced levels of Earths’ most precious resource could spark future military conflicts. While this narrative may be on the dire side of the spectrum, the reality is that water is both societally and economically vital. And that’s what brings us to First Trust Water (NYSEARCA:FIW).
One of the best ETFs to buy to align your portfolio with future developments, FIW is among a growing number of funds dedicated to both potable water and wastewater management services. An advantage that FIW has over some of its rivals is volume. While FIW isn’t the most heavily traded ETF, it’s not at imminent risk of becoming a zombie.
Global X SuperDividend ETF (SDIV)
Inflation sucks. With the price of gasoline reaching close to $7 per gallon where I live along with the cost of basic items like bread absolutely skyrocketing, it’s been a rough ride. Although I don’t need to explain the pain of inflation, it comes down to the erosion of purchasing power.
From January 2020 to June 2022, the dollar’s purchasing power slipped 13%. To provide some context here, between January 2013 through December 2019, purchasing power declined by 10.4%. This erosion translates to a tax on real household earnings. Put another way, your wages aren’t rising enough to compensate for inflation, which is a good reason to invest in Global X SuperDividend ETF (NYSEARCA:SDIV).
Ordinarily, you probably wouldn’t want to dive in to SDIV, because the fund holds speculative investments. However, at this specific juncture, SDIV could be one of the best ETFs to buy now because of the very generous double-digit yield.
It’s not going to make everything acceptable about the new normal. However, it could go a long way to mitigating the pain.
Invesco S&P 500 Low Volatility ETF (SPLV)
When people talk about the best ETFs to buy now (or any other subject matter), they don’t literally mean the best in all circumstances. For some people, they prefer higher-risk, higher-reward ventures because such vehicles fit their personalities. And for others, they may prefer conservative investments to ride out a storm, say a possible incoming recession.
With the latter category in mind, I present to you the Invesco S&P 500 Low Volatility ETF (NYSEARCA:SPLV). It’s among the best ETFs to buy for investors who take to heart the concept that time in the market beats timing the market.
As the name implies, the SPLV ETF focuses on some of the most stable investment ideas available. While I can’t say that SPLV is completely immune to volatility — it is down about 10% YTD — in comparison to the broader benchmark SPDR S&P 500 ETF Trust (NYSEARCA:SPY), it’s faring much better. The SPY ETF is down approximately 20% YTD, so SPLV is truly living up to its name.
Vanguard Utilities ETF (VPU)
I can’t say for certain that a recession is coming. However, with geopolitical tensions surging, inflation becoming an inferno and the world’s central bank toying with a possible downturn, the odds seem to suggest that we’re in for at least some kind of correction.
I can also say that I hope a recession won’t materialize. But here’s the thing about that sentiment: in late 2005, former Fed chair Ben Bernanke believed that there was “no housing bubble to go bust.” At least for this take, his optimism clouded his judgment. Therefore, it’s probably best to prepare for a recession.
If you have that mindset, then the Vanguard Utilities ETF (NYSEARCA:VPU) could be one of the best ETFs to buy now. As a general idea, utilities offer an ideal place to park your money amid troubling economic backdrops. Access to power will be one of the last expenditures that households will sacrifice, because that would essentially represent the end in a digitalized and connected society.
Seeing as how utilities have a permanent demand profile, VPU is something to look at very closely if you feel nervous about the future.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.