The opinions which follow are written for informational and educational purposes only, and they are not meant to provide specific recommendations for any individual or on any specific security or investment. This article is only intended to provide educational information about the financial industry.
If you are a retail investor, then you have plenty of options regarding what type of asset class you might want to buy. Maybe you’ll buy a call or put option. Maybe you’ll buy a stock of your favorite company, such as Apple or Starbucks. Maybe you’ll buy a dividend stock, so you can get paid to hold the stock. For the stable, long-term investor, ETFs may provide stability while also allowing you to get exposure into an economic sector that you’d like to invest into.
According to Investopedia, an ETF is “a type of security that tracks an index, sector, commodity, or other asset, but which can be purchased or sold on a stock exchange the same as a regular stock.” (1) There are many different types of ETFs. There are sector ETFs, Bond ETFs, Regional ETFs, Currency ETFs, and several other types of ETFs. ETFs can be simply described as a “basket of stocks” that tracks a certain sector or group of sectors. There are several types of ETFs that are both interesting and innovative and may allow you to enter a sector without having to pick specific stocks. Here are my top picks for ETFs, or types of ETFs, that I see as having high growth potential and being interesting to maybe buy.
ARK ETFs
ARK ETF are a number of different ETFs managed by ARK Investment Management LLC. There are several ARK ETFs that are extremely interesting and have a high potential. Particular ARK ETFs that are worth looking at include ARK Next Generation Internet, ARK Genomic Revolution ETF, ARK Autonomous Technology & Robotics, and ARK Fintech Innovation. Each of these ETFs tracks a particular sector that aims to disrupt the current market they are in. Although many of these companies within the ETF are yet to be profitable and report losses year after year, it is only a matter of time before these companies begin to be profitable.
VanEck Vectors Social Sentiment
This ETF, which just went live last week, tracks social media mentions of stocks and compiles the 75 most popular stocks in any given year. According to CNBC, “The Van Eck Vectors Social Sentiment ETF (BUZZ) selects 75 stocks with the most bullish social media sentiment and packages them into an ETF.” (2) If you’re looking to get into stocks with the most social media mentions, the BUZZ ETF should most definitely be on your radar. As social media continues to be a major factor in the movement of stocks, the BUZZ ETF could most definitely be a good play for the upcoming year.
Inverse ETFs
Have you ever thought to yourself: How can I make money when the market crashes? Well, you can, by purchasing something called an Inverse ETF. According to Investopedia, “An inverse ETF is an exchange traded fund (ETF) constructed by using various derivatives to profit from a decline in the value of an underlying benchmark. Investing in inverse ETFs is similar to holding various short positions, which involve borrowing securities and selling them with the hope of repurchasing them at a lower price.” (3) When looking to buy an inverse ETF, you may want to buy a 1x, 2x, or 3x, exposure, which increases your risks but also increases potential reward. Some notable inverse ETFs include ProShares UltraPro Short QQQ ETF, ProShares Short S&P 500, and Direxion Daily S&P 500 Bear 3X Shares. You can find a full list of inverse ETFs here:
https://etfdb.com/etfs/inverse/equity/#etfs&sort_name=assets_under_management&sort_order=desc&page=1.
While this is by no means an exhaustive list of notable ETFs, these are three ETFs that I think have high potential and are interesting to watch. ETFs are more stable than regular stocks. There is still risk associated with investing in any security. Be careful and never invest more than you are willing to lose.
- https://www.investopedia.com/terms/e/etf.asp
- https://www.cnbc.com/2021/03/04/buzz-etf-tracking-social-media-sentiment-launches-thursday-amid-reddit-manias-in-stocks.html
- https://www.investopedia.com/terms/i/inverse-etf.asp