The best ETFs from the most promising economic sectors
If you need to diversify your portfolio with just one asset, check out the best ETFs for 2021! Exchange-traded funds (ETFs) hold various assets in one, so you don’t have to search and pick them individually. Usually, these funds stick to a theme. For example, an ETF can focus only on bonds, stocks, or other asset classes.
The best ones center around certain sectors because you can pick those that will perform well depending on the current situation. Later, you’ll see that our recommendations cover products and services that are likely to enjoy high demand post-COVID. For example, we included a healthcare ETF because of the growing need for medical supplies.
We will cover six exchange-traded funds that are found in the most promising sectors. Before we do that, though, we will explain why it might be a good idea to purchase ETFs. We will also talk more about the different types and explain how you can pick the best ones. If you prefer other assets, we will show you some alternatives to ETFs.
Why should I consider ETFs?
You might be wondering why we covered the best ETFs for 2021. After all, they’re not the only ones that invest in several assets in one convenient package.
Mutual funds and index funds work similarly to ETFs. However, they don’t provide the same versatility that ETFs have, and this is possible because of the different kinds available:
- Market or Index – These follow a specific market index such as the NASDAQ, the S&P 500, and the Dow Jones. As the name suggests, index ETFs are similar to index funds.
- Bond – If you want to try investing in bonds, these ETFs are a good choice. They may contain all sorts of bonds like corporate bonds, treasury bonds, and munis.
- Sector – Our picks for the best ETFs for 2021 all belong here, and they expose you to industries that have a good chance of thriving during the pandemic. In other words, these are the ETFs that are likely to provide huge profits.
- Actively managed – These are more akin to mutual funds because they aim to beat market indexes.
- Foreign market – If you’re from the US, you’ve probably wondered if you could invest in overseas assets. With this type of ETF, you’ll be able to get into these non-US markets, such as Japan’s Nikkei Index.
Those are just some of the ETF types you could buy and sell. Now, let’s see what makes them so appealing to many investors:
- Easy to trade – You may only trade other assets like mutual funds at the end of the day. On the other hand, you could buy and sell ETFs at any time of the day.
- Transparency – Many ETFs are based on indexes, so they report their holdings daily.
- Dividend yield – ETFs can be a source of passive income. There are two types: qualified and nonqualified, and the ETF itself assigns the former, while the other comes from the dividend stocks inside the fund.
- Low taxes – They distribute fewer capital gains tax compared to mutual funds.
- Low fees – Investing in ETFs and index funds means you must pay for their operating expenses, otherwise known as their expense ratio. The former charges less, though.
- Order types – You can take advantage of various order types to buy and sell at the best price. This is a huge plus because you’ll need to adapt to the changing market.
The best ETFs for 2021 and their sectors
- Technology – iShares Evolved US Technology ETF (IETC)
- Energy – Invesco Solar ETF (TAN)
- Materials – Fidelity MSCI Materials ETF (FMAT)
- Crypto – ProShares Bitcoin Strategy ETF (BITO)
Technology – iShares Evolved US Technology ETF (IETC)
It’s no surprise that tech-related assets are likely to boom soon. After all, more gadgets and programs are present in our lives nowadays.
The iShares Evolved US Technology ETF invests in Amazon, Nvidia, and Salesforce.com. These cover sectors which are likely to see more demand soon.
Nowadays, people get everything they want and need from Amazon, so it’s likely to grow. Once we fix the global chip shortage, Nvidia is at the right spot to benefit from it.
The worldwide remote work trend is causing more companies to get the best management tools. Salesforce is one of those, so it may also perform well in the coming years.
Overall, this ETF may provide substantial gains due to the information technology trend. At the time of writing, the IETC price is $58.68. You may want to buy it while it’s low!
Read More: The Best Mutual Funds Right Now
Energy – Invesco Solar ETF (TAN)
Investors can take advantage of government actions to boost their portfolios. Take President’s Biden’s Infra Plan, for example. It will invest almost $15 billion in renewables!
He will also support companies that could help homes and vehicles switch to solar power. In response, investors might want to invest in assets that are related to this type of energy.
That’s where the Invesco Solar ETF could come in handy. It invests in solar stocks, which may prove to be a growth ETF and beat the overall market.
What’s more, it holds Enphase stock, our top choice for solar stocks this year. At the time of writing, it makes up 10.56% of the fund. Its year-over-year earnings have been great as well.
Some might have a problem with investing in just one type of renewable. Yet, more countries are adopting it, especially the United States. That’s why it’s one of the best ETFs for 2021.
At the time of writing, the price of Invesco Solar (TAN) closed at $88.44. It’s on a downward trend right now, so you may want to consider adding it to your portfolio.
Materials – Fidelity MSCI Materials ETF (FMAT)
Investors also check what the Fed is doing when looking for promising investments. At the time of writing, it is still keeping interest rates around 0% to 0.25%.
This is great for the materials sector because it makes their products cheaper for foreign investors. In other words, the low rates increase demand.
What’s more, the rates reduce capital spending for companies in this sector. In turn, these firms are more likely to yield more profit in the coming years.
Countries are trying to restart their economies, so that means reopening businesses. In turn, they will start buying more raw materials for their goods.
That’s why we picked Fidelity MSCI Materials ETF (FMAT) as one of our best ETFs for 2021. Out of all the ETFs in this sector, why did we pick this one?
That’s because its operating expenses are 0.08%. This is a good choice for those looking for their first ETF or if you need a low-cost option. At the time of writing, its price was $43.42.
Crypto – ProShares Bitcoin Strategy ETF (BITO)
Cryptocurrency is gaining attention across the globe. Nowadays, more people are investing in this digital asset, and some of them even prefer crypto over gold and stocks!
Some countries like El Salvador take it a step further by adopting it as legal tender. Soon, others like Panama will follow in its footsteps. Is it any wonder why it has the best ETF for 2021?
That’s why we included the world’s first bitcoin ETF. This caused a buzz on mainstream media after building up $1 billion in just a couple of days, making it the second-highest ETF.
The crypto market holds a lot of potentials, so it’s bound to provide investors with huge returns. That’s why it’s a good idea to invest in assets related to it.
Even better, it has a relatively lower price than other ETFs. At the time of writing, the BITO ETF price was $39.51. If you’re looking for your first ETF, this might be it!
How do I pick among the best ETFs of 2021?
Now that you know about ETFs, it’s time to pick the best ones. We want readers to find their best picks themselves, and perhaps you can find better options than our suggestions.
If you’re still undecided, we could show you how to select the right fund. Let’s look at the following tips to making your list of the best ETFs for 2021:
- Start with yourself – You shouldn’t purchase any asset just because an article or video told you. Instead, be clear about why you’re investing in the first place. Do you want to earn more money, or are you looking for a way to keep your finances safe? Your long-term and short-term investment objectives will determine the assets you must buy.
- See the risks – All investments have risks. That’s why we listed the ones for ETFs earlier. Be aware that you could lose money in any investment, no matter how “safe” it’s known to be. What’s more, you might not earn the same amount of dividends every time.
- Check the sponsor – ETS has sponsors who manage the assets inside. Check their website to get a feel on how they will manage the fund. In turn, you’re more likely to make the right investment decisions.
- Find the right broker – You will need a brokerage account or a financial advisor so you can start purchasing ETFs. That’s why you must look for the best one. Note that they receive compensation from your commission payments. This is a huge factor in the total returns your ETF will provide.
- Study your ETFs – You must know how your assets work, so make sure you learn all you can about your ETFs. Look at their metrics, such as their price and market cap. However, we focus on their holdings because those play a huge role in how they will perform in the future.
Of course, ETFs aren’t your only option. You could start looking for good investments in the stock market. Here’s our list of the most promising growth stocks right now.
You could check out more investment ideas from our other articles. Explore asset classes like real estate, bonds, mutual funds, and cryptocurrencies.
Note that this article is just editorial content that is not meant to provide investment advice. As we said, choose your assets based on your investment plans.