The investment landscape has been witnessing a mass migration of investors from hedge funds and mutual funds to more secure avenues; primarily Exchange Traded Funds (ETF). As in the case of stocks, it’s a tricky affair to choose the right fund, especially for newbies in the market.
So, what lures investors to ETFs? Investment becomes a hobby rather than a chore when the procedure is simple and transparent. Low costs and high returns, when combined with better tax benefits, add to the fun component, and ETFs are the best bet for those who find these conditions appealing.
Moreover, the way ETFs are structured offers investors the option to diversify instantly, with choices ranging from small-cap and energy stocks to emerging market stocks and whole indexes like the S&P 500. The fact that ETFs track a single index and they can be traded during the entire trading period, unlike mutual funds, also makes them attractive.
It is true that every good thing in life comes with a price! Here too one has to pay a brokerage each time one buys or sells an ETF, which makes it an option more suitable to lump-sum investors. ETFs being passively managed funds, an ideally balanced portfolio should provide core representations of key market segments.
The recent changes in stock markets, marked by the overall positive momentum, have brought in new investment trends, and ETFs are no exception. So, it is important to identify the less risky ones that offer maximum returns.
Unlike mutual funds, ETFs track a single index and they can be traded during the entire trading period
SPDR S&P Homebuilders (XHB) is at a unique spot this year, thanks to the broad-based uptrend the US housing market has witnessed in the later part of 2017, including the strong housing starts growth.
Vanguard Health Care (VHT), one of the best among the Vanguard funds, will be a wise bet as the healthcare sector was one of the top performers last year. The stock is modestly priced and there is ample room for diversification – from large-caps like Johnson & Johnson to comparatively smaller healthcare firms.
We are living in an era when management of water resources is a top priority for every government. Tortoise Water Fund (TBLU) is one of the few promising EFTs focused on water infrastructure, water management and water treatment companies. Going by the trend, TBLU is poised to stay above its peers this year.
Here’s a fund that reached a record high in the beginning of 2018, after maintaining a consistent growth trajectory. A mixed bag of smaller companies with strong performance history, Powershares Russell Top 200 Pure (PXLG) is well-positioned to reap the benefits of the recent tax reform as the class of firms it represents typically generate their revenues from the local market.
For those who want to explore the potential of emerging markets, iShares MSCI Emerging Markets (EEM) is the best option, considering the recent vibrancy in Asian and South American economies.