The pandemic hasn't changed common sense investment advice with regard to asset allocation, but out of dark times often comes unusual opportunity. There are a number of burgeoning industries set to grow from the affects of coronavirus, so an investigation of attractive Exchange Traded Funds(ETFs) is worth starting. There is a good chance we look back at this moment in history and wish we had been a part of these industries at their genesis.
I greatly value simplicity when it comes to investing, so while you always have the option of buying individual stocks, it's much more convenient to simply purchase a sector or thematic ETF if you're bullish on that particular industry. Additionally, thematic ETFs allow you to diversify your risk across many companies, so the major losers are offset by the major winners. The ETFs mentioned below do not comprise core portfolio holdings, but they can be added as a supplement to an already diversified portfolio. Disclaimer: some of the more popular ETFs do come with healthy expense ratios, but costs may be justified if the underlying portfolio provides the exposure you're looking for.
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1. Global X Robotics & Artificial Intelligence ETF
For those feeling optimistic about the future of robot adoption and utilization, Global X Robotics & Artificial Intelligence ETF (NASDAQ: BOTZ) provides exposure to some of the most innovative companies in the space like ABB Limited, Nvidia, and Fanuc Ltd. There is little debate that robots will continue to replace human-performed tasks in and out of the workplace. This ETF provides a medium to express that view at an expense ratio of 0.68% -- expensive relative to broad market ETFs, but the fund creates a convenient way to invest in a high-growth area. If you've ever read Martin Ford's "Rise of the Robots", this ETF will seem quite attractive.
2. Amplify Transformational Data Sharing ETF
As much as this might seem like an endorsement for Bitcoin, this is simply an expression of interest in the underlying technology -- the blockchain. Amplify's Transformational Data Sharing ETF (NYSEMKT: BLOK) seeks to invest in companies that enable data sharing technology or partner with firms that do. The blockchain threatens to eliminate middle-to-back-office functions of large financial institutions, which I view as an aspirational and worthwhile endeavor. In other words, the blockchain, as a peer-to-peer distributed ledger, will contribute to streamlining the world's financial transactions at lower cost. With an expense ratio of 0.70%, this ETF provides an aggregation of companies furthering blockchain's cause.
3. ETFMG Alternative Harvest ETF
Recreational cannabis is not yet legal on the federal level, but when we look at the looming potential for increased acceptance, it's very difficult to ignore the industry. Tremendous resources are put to use every year to deter marijuana use and possession. It has been estimated that police dedicate $3.6 billion annually to enforcing these laws, which disproportionately adversely affects communities of color. Our leaders need to seriously consider if this is something which we're going to continually dedicate resources to, or if there are better uses of taxpayer funds.
One way to bet on the future of cannabis is through ETFMG Alternative Harvest ETF (NYSEMKT: MJ), which seeks to invest in companies that engage in the legal cultivation and distribution of cannabis products. Top holdings include GW Pharmaceuticals, Cronos Group Inc., and Canopy Growth Corporation, and the fund charges 0.75% annually. Given that we've reached an important reprioritization stage in American society, I believe this is one theme that will see continued visibility and tremendous growth -- pun very much intended.
4. Global X Lithium & Battery Tech ETF
Global X offers another ETF of interest -- the lithium production cycle via its focused Global X Lithium & Battery Tech ETF (NYSEMKT: LIT). Lithium batteries are used in many wearable technologies, cameras, tracking devices, electrical and medical equipment, as well as a laundry list of other everyday items. An investment in this ETF signifies that the world is becoming increasingly portable, traceable, and wireless. With an expense ratio of 0.75%, you'll receive an aggregation of the top companies in this niche business -- including Tesla, LG, and Samsung.
The main benefit of investing in thematic ETFs is that it helps us get a head start on where we feel the world will be in a decade and beyond. Given the advantages of long-term, buy-and-hold investing, getting ahead of emerging trends via ETFs is likely to pay off over time. While the costs are not to be taken casually, there are strong reasons to consider allocations to some of the highest-growth industries via pooled investment vehicles.
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