3 Must-Have Thematic ETFs For the Long-Term Investor
These funds can then be complemented by thematic ETFs that target a specific industry or economic theme. Here are three specialized ETFs that deserve a spot in any long-term growth...
More than 400 new exchange-traded funds (ETFs) were launched last year. According to Morningstar, new funds hauled in approximately $800 million as the popularity of the one-size-fits-all investment vehicle continued to soar in 2021.
That momentum is expected to carry over into 2022. Experts say this will likely be another record setting year for both ETF launches and net flows. This is good news for investors looking to gain exposure to a lot of stocks in one convenient basket.
The ETF universe has swelled to a level few expected a decade ago. Including leveraged and inverse ETFs, there are over 2,700 ETFs available on U.S. exchanges.
For equity investors, figuring out which ones to purchase can be a daunting task. One approach is to own a handful of broad-based ETFs that track major indices and provide exposure to potentially thousands of individual companies.
These funds can then be complemented by thematic ETFs that target a specific industry or economic theme. Here are three specialized ETFs that deserve a spot in any long-term growth portfolio.
iShares U.S. Medical Devices ETF (NYSEARCA: IHI)
As the name suggests, this fund provides exposure to U.S. companies that make and distribute various medical devices. This is a good area to be invested in because of two powerful themes—the aging of the global population and the rising prevalence of chronic diseases.
Together, these trends are expected to lead to a growing number of patients undergoing diagnostic and surgical procedures that involve a range of medical devices. Fortune Business Insights forecasts that the global medical devices market will grow 5.4% annually and reach $658 billion by 2028.
The iShares U.S. Medical Devices ETF is a great way to participate in this projected growth. It currently contains 65 stocks of domestic companies involved in the manufacture of health care equipment & supplies and life sciences tools & services. Thermo Fisher Scientific, Abbott Laboratories, and Medtronic are the prominent holdings. This ETF has a reasonable 0.41% expense ratio and has produced an annualized return of 21.6% over the last 10 years.
SPDR Kensho Smart Mobility ETF (NYSEARCA: HAIL)
This fund tracks the Kensho Smart Transportation Index, a collection of innovators that offer products and services related to smart transportation. This encompasses areas like autonomous and connected vehicle technologies, drones, and advanced transportation tracking.
Given the way the world is expected to transport goods and people in the future, this ETF holds tremendous growth potential. It is an eclectic mix of 85 U.S.-listed stocks and includes several international companies such as Honda Motors and Li Auto. Ford Motor Company, Uber Technologies, and Tesla are among the more recognizable domestic names.
The SPDR Kensho Smart Mobility ETF has only been around for about 4 years but has already established an impressive track record. The three-year annualized return is 34.7% which has made the 0.45% expense ratio almost unnoticeable. It is a rather small fund with roughly $131 million in assets under management, but liquidity risk is likely to dissipate as the fund attracts more interest from institutional and retail investors.
Given the recent selloff in electric vehicle space, the fund is trading 34% below its record high of a year ago. Investors looking to ride the smart mobility theme would be making a smart move buying here.
iShares U.S. Infrastructure ETF (BATS: IFRA)
In November 2021, Congress approved the largest federal investment in U.S. infrastructure in decades. With roads, bridges, airports, and the electrical grid sorely in need of upgrades, there will be ton of spending on domestic infrastructure projects this decade.
Research group McKinsey has estimated that $150 billion per year will be required to address the country's infrastructure needs. This is not only good news for the safety of the American people and job creation, but for companies involved in these industries. Many of them are in the iShares U.S. Infrastructure ETF.
From railroads and utilities to materials and construction companies, it holds 149 stocks that are poised to benefit from U.S. infrastructure development. What's even more attractive about this ETF is that the holdings are equally weighted. This means no single stock dominates the performance of the fund, so investors get a diversified basket of infrastructure plays without concentration risk.
Utility companies represent the largest weight in this fund at 44% followed by industrials and materials. NiSource, Allegheny Technologies, and Cleveland Cliffs are just a sample of the stocks in this wide-ranging infrastructure fund.
The expense ratio is a low 0.30% and the fund has generated a 20.8% annualized return over the three-year period. With U.S. infrastructure projects expected to be at the forefront of economic activity this decade, this ETF should be a valuable building block for long-term portfolio growth.
Entrepreneur Editors' Picks
Formerly Enslaved Black Man Nearest Green Taught Jack Daniel Everything He Knew About Whiskey. Today, the Founder of Uncle Nearest Premium Whiskey Celebrates His Legacy.
Leadership Lessons From the Exclusive Creativity School That 'Packs 5 Years Learning Into 5 Days'
3 Expert-Backed Strategies for Staying Calm in Times of Confrontation
The CEO of Wayfair Has Helped Revolutionize Digital Shopping for 20 Years. Here's How He Handles Rocky Economic Conditions.
This Founder Went to Prison When He Was 15 Years Old. That's Where He Came Up With the Idea for a Company Now Backed By John Legend.
3 Signs You're Letting Pride Get in the Way of Being Successful
Chip and Joanna Gaines and Shonda Rhimes Found Incredible Success By Using This One Entrepreneurial Strategy. Here's How You Can Too.