By GORDON PAPE
Thursday, April 25, 2019
Editor and publisher of the Internet Wealth Builder and Income Investor newsletters
Recently, I looked at exchange-traded funds for conservative investors. But some people are more adventurous so here we'll concentrate on some aggressive investment personalities. All these ETFs are Canadian-based.
THE GAINS CHASER Capital gains are the priority for these investors. Dividends are secondary - what these folks really want is to see their dollars grow at an above-average rate. Here are a couple of ETFs that suit their personalities.
BMO Nasdaq 100 Equity Hedged to CAD Index ETF (ZQQ): Everyone loves U.S. tech stocks right now. Yes, some of them have had problems - Facebook Inc., Apple Inc. and Nvidia Corp. to name three. But over all, the sector keeps rising and the returns from this ETF keep flowing in. After a bit of a dip in 2018, this one is ahead by 21.2 per cent so far this year and the five-year average annual return to March 31 was 15.6 per cent. You'll find all the usual suspects in this portfolio.
The most heavily weighted holdings are Apple, Microsoft Corp., Amazon.com Inc., Facebook and Alphabet Inc., which together account for about 44 per cent of the total. The fund only distributed 30.2 cents a unit in 2018 (one annual payment, in December). But you don't really care about that, do you? The management expense ratio (MER) is 0.39 per cent.
BMO India Equity Index ETF (ZID): Most of the attention these days is on China, but India has been enriching savvy investors for several years. This ETF seeks to emulate the S&P/BNY Mellon India Select DR Index, which tracks a portfolio of Indian companies that trade as depositary receipts in New York. There are 16 stocks in the portfolio, with the heaviest weightings in HDFC Bank Ltd. (15.8 per cent), Reliance Industries Ltd. (15.4 per cent) and Infosys Ltd. (13.7 per cent). Except for a small stumble in 2016, the fund has produced healthy profits for six of the past seven years and was up 8.3 per cent in the first quarter of this year. The one-year rate of return to March 31 was 20.5 per cent and the five-year average annual compound rate of return was 15.8 per cent. The MER is 0.73 per cent.
THE FUTURIST You want to be on the leading edge of new developments.
You're not worried about big gains today, it's what's coming that really matters. Try these ETFs.
Harvest Blockchain Technologies ETF (HBLK): Everyone first got excited about blockchain because it was the technology that cryptocurrencies were built on.
But cryptos are fading away faster than an ice cube in June, so what's the big deal now? Banks, apparently. According to those who understand how the system works (of which I'm not one), the world financial system will eventually be built on the speedier, safer blockchain system. International Business Machines Corp.
says it also has important applications for health care, government and numerous industries.
We may be starting to see evidence of that in this ETF. After a miserable start following its launch early last year, the fund has suddenly turned hot, posting a gain of almost 32 per cent in the first quarter of this year. The portfolio is made up of 21 stocks including Microsoft, Visa Inc., Mastercard Inc., IBM and a bunch of companies you've never heard of.
The management fee is 0.65 per cent.
Horizons Robotics and Automation Index ETF (RBOT): The robots are coming! The robots are coming! They'll steal all our jobs and leave us begging for change on street corners. At least that's the way the Luddites tell it.
Others say that while industry is being disrupted, the end result will be the creation of more, better-paying jobs. After all, someone has to design, build, service and manage the robots. This ETF seeks to replicate the performance of the Indxx Global Robotics & Artificial Intelligence Thematic Index, so you get some AI stocks tossed into the mix as well.
This is an international fund that invests mainly in Japan, the United States and Switzerland. So far, it's been a money loser, down 12.4 per cent on an annualized basis since it was launched in November, 2017. But it has looked better recently, gaining 17.5 per cent in the first quarter of this year. Robotics and artificial intelligence are clearly the twin themes of the future. But, as with the birth of the internet, it's hard to know at this stage which companies will prosper. The management fee is high at 0.68 per cent.
THE RISK TAKER You want profits and you're prepared to roll the dice to get them, even if that involves a high degree of risk. Here are a couple of ETFs for you.
iShares S&P/TSX Capped Information Technology Index ETF (XIT): Everyone knows U.S.
tech stocks have been hot in recent years. But Canadian tech stocks? Are there any, really? Yes, there are and right now they are doing very well. This ETF is ahead 29.6 per cent, year-to-date. And it has been a consistent performer.
The three-year average annual rate of return to March 31 was 19.9 per cent and the five-year was about the same. So what stocks are delivering those impressive numbers? The largest holdings include Shopify Inc., CGI Inc., Constellation Software Inc., Open Text Corp. and BlackBerry Ltd. A word of warning, however. Because of the small size of the Canadian tech sector, the top stocks in this portfolio have unusually heavy weightings. Shopify, CGI and Constellation account for more than 70 per cent of this fund's assets. If any one of them hits the skids, the whole portfolio will plunge in value. In other words, this great performer is extremely fragile. Be warned. The MER is 0.61 per cent.
BMO China Equity Index ETF (ZCH): Last year was a miserable one for Chinese stocks and this ETF reflected that by losing 16.5 per cent. This year, it's a complete reversal. ZCH is ahead 21 per cent so far in 2019 and showing no sign of fading. Why? In large part because of one man - U.S.
President Donald Trump. His tweets and comments continue to suggest the United States and China are close to a wide-ranging deal that will end or at least diminish the trade frictions between the two countries and boost optimism for the future growth of international commerce. If that happens, expect good things from this ETF, which tracks the performance of major Chinese companies that trade in New York as American depositary receipts. But if the talks suddenly collapse and Mr. Trump responds with another round of tariffs, watch out. That's the big risk here. The MER is 0.71 per cent.
With more than 700 ETFs to choose from, finding those that best suit your investment profile can be a challenge. But if you understand your investment personality, the process becomes a lot easier. Just remember the old investment maxim: Past returns are no guarantee of future results.
If you understand your investment personality, finding the right ETF can be much easier. The BMO India Equity Index ETF offers exposure to 16 Indian companies and the fund was up 8.3 per cent in the first quarter of this year. The Horizons Robotics and Automation Index ETF takes a tech-oriented approach and the fund gained 17.5 per cent in the first quarter.
SAM PANTHAKY/AFP/GETTY IMAGES; CHRIS YOUNG/THE CANADIAN PRESS