Exchange-traded funds (ETFs) are an excellent low-cost, low-dollar-entry alternative to mutual funds. With the number of ETFs available today, you can track almost any index or field that you can think of with an ETF that meets your investment goals and risk tolerance.
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Potentially High-Performing ETFs for 2016
If you cannot decide what type of ETF works best for you, the following examples are suggestions that experts have targeted as potentially high-performing ETFs for 2016. See if any of these strike your fancy.
- iShares MSCI USA Quality Factor ETF (QUAL) – This ETF contains large to mid-cap U.S. stocks with an emphasis on strong fundamentals — high return on equity, low debt-to-equity, and stable earnings growth measured year-over-year. It has a low 0.15% expense ratio, which is a relative bargain for large-cap ETFs. A weighting toward technology stocks combined with an emphasis on fundamentals make this fund a solid choice for a rebound.
- PureFunds ISE Cyber Security ETF (HACK) – Cybersecurity is a rapidly growing field, and given the collective threats we face and increasing interconnectivity of items, that will not change anytime soon. However, the overall number of companies battling for market share makes investment in any individual company risky. The HACK ETF allows broad exposure to the field to minimize the risk while allowing you to invest in a growing market.
- iShares U.S. Oil & Gas Exploration & Production ETF (IEO) – Oil and Gas? Certainly, energy stocks have been pummeled lately, but if you believe that oil prices will finally begin to recover in 2016, IEO may be the fund for you. This fund is less weighted toward the large oil multinationals and more toward independent production and exploration companies. Realistically, this may be a better bargain toward the end of 2016 (if not 2017), but the game of chicken in the oil market is bound to end before too long. When it does, these smaller companies are in a more flexible position to recover.
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- SPDR Barclays Convertible Securities ETF (CWB) – With the Fed finally raising interest rates and planning future increases to reach more normal levels, the bond market may be in for a rough time. Convertible bonds may be a way to avoid a potential bear bond market. Since convertibles can be converted into equity by definition, they historically perform better than most bonds during periods of rising rates.
- iShares Russell Top 200 Growth ETF (IWY) – The Russell Top 200 Growth Index has performed well in recent times, outpacing the S&P 500 since the beginning of 2013 by 900 basis points. It maintains a relatively low volatility while keeping a large presence in the technology and healthcare sectors.
- Market Vectors ChinaAMC SME-ChiNext ETF (NYSEARCA: CNXT) – As with oil and gas investing, this seems like a counterintuitive play given the weakness of the Chinese market. However, the CNXT ETF is still up 46% for the year even after a significant fall (by June it had more than doubled for the year). ETFs that invest more in Chinese manufacturing or commodities took a larger hit in 2015, but those that have greater holdings on internet-based firms and consumer-market companies are handling the Chinese economic transition just fine. This trend may continue through 2016.
The above notes do not constitute endorsements, just the opinions and observations of various experts in the field — who have been wrong before. Do not base your investing decisions solely on this (or any single) article. Do your own research with multiple sources to make sure that you are comfortable with your investing choice.
Did you find any of these ETFs interesting? If not, feel free to do your own digging through the multitude of ETF-related Internet resources available to you. Free sites like ETF.com have plenty of information to get you started. Good luck, and happy investing!
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