Thematic Investing Trend to Stay in Vogue: 4 ETF Areas to Consider
The ongoing year has been mostly dominated by the coronavirus-outbreak related headlines leaving investors in a continuous quest for good options for putting their money in. Amid the pandemic-related concerns, thematic investing has emerged as a popular trend.
Going on, the aggravating coronavirus outbreak has caught investors’ attention, making them increasingly apprehensive about another round of lockdowns. Investors are also concerned about the uncertainty surrounding the additional U.S. fiscal stimulus package, which is essential for an economic recovery.
Against this backdrop, let’s take a look at some of the themes that are currently trending in the investment world:
Sustainable Investing ETFs
The health crisis has also impacted the investing world, with market participants showing greater interest toward conscious investing, spurring demand for environmental, social and governance (ESG) funds. Not only the coronavirus pandemic but other factors like protests based on racism, geo-political tensions and changing climatic conditions are responsible for the growing popularity of sustainable investing funds. Riding on the surging demand, ESG funds are witnessing record inflows in the ongoing year. In fact, ESG ETFs have already witnessed inflows of nearly $22 billion till around October this year, coming to approximately thrice the investments in 2019, per a Bloomberg article.
Increasing awareness about ESG funds among companies marked by continued technological advancement and digital revolution has been observed since the pre-pandemic era. Notably, ESG investing has also shown some resilience and continues to gain investor attention amid the pandemic.
Vanguard ESG U.S. Stock ETF is a fund that investors can consider. It tracks the performance of the FTSE US All Cap Choice Index comprising large-, mid-, and small-capitalization stocks. It does not include companies operating in adult entertainment, alcohol and tobacco, weapons, fossil fuels, gambling and nuclear power industries. It also doesn’t consider companies which do not meet the U.N. global compact principles and diversity criteria. It charges 12 basis points (bps) in fees (read: ).
Cannabis ETFs
The cannabis industry has come under the spotlight since vice-president-elect Kamala Harris’ comment that the Biden administration would decriminalize cannabis at the federal level in the United States, during a debate with her Republican counterpart Mike Pence, per a Bloomberg article.
Remarkably, president-elect Joe Biden has also spoken about the marijuana industry. In this regard, he noted that no person will go to jail for "smoking marijuana”, per a Bloomberg article.
Per sources, the decriminalization of cannabis at the federal level will help the cannabis companies get an improved access to banks and other traditional financial institutions. Markedly, the players in the marijuana space were denied financial assistance by the service providers despite many U.S. states having legalized marijuana’s usage, per a Reuters article. Moreover, it has been found that these companies faced cash crunch owing to regulatory issues, while having to deal with the lack of profitability due to high costs, according to a Reuters article.
Going on, the House passed a sweeping legislation to decriminalize marijuana and remove non-violent marijuana-related convictions on Dec 4, per The New York Times article. However, the move can be opposed by the Senate members. Apart from this, in early November, voters in Arizona, Montana, New Jersey and South Dakota voted in favor of the adult use of cannabis, bringing the total number of states that have cleared it for that purpose to 15, per a CNBC article.
ETFMG Alternative Harvest ETF can be a good choice for investors. It is the first U.S. and the world’s largest ETF focusing on the global cannabis/marijuana industry. It tracks the Prime Alternative Harvest Index, designed to measure the performance of companies within the cannabis ecosystem bene???ting from global medicinal and recreational cannabis legalization initiatives. The ETF charges 75 bps in annual fees (read: ).
Alternative Energy Funds
Alternative energy includes any energy source that acts as a replacement to conventional and non-renewable fossil fuel. These energy sources are also called renewables as they are continuously replenished through natural processes. This space has been making it to headlines these days for a number of reasons. Increasingly, big corporations are making or promising investments in achieving the most coveted carbon neutral status. Also, the green energy space has been a hot discussion topic in the U.S. election campaign.
According to the International Energy Agency (IEA), renewable energy sources are expected to make up 30% of the world’s electricity by 2024 in comparison to the current 26%. Per Allied Market Research, the global renewable energy market is expected to reach a value of $1.51 billion, seeing a CAGR of 6.1% between 2018 and 2025.
Thus, investors can consider the First Trust NASDAQ Clean Edge Green Energy ETF . The fund seeks investment results that correspond generally to the price and yield, before fees and expenses, of the NASDAQ Clean Edge Green Energy Index. The fund’s expense ratio is 0.60% (read: ).
Robotics Investing Funds
Due to the coronavirus outbreak, the robotics market is flooded with opportunities as robots are being used for jobs such as sanitizing hospitals, homes and workplaces along with monitoring, surveying, handling, and delivering food and medicines. The current conditions seem favorable for the robotic markets in government applications, such as health, security and defense. Also, with the reopening of the U.S. economy, it is believed robots will see increased usage in industrial, manufacturing, healthcare, logistics, inspection and maintenance, automotive, electronics, and food and beverage areas.
This is making funds like ROBO Global Robotics & Automation ETF an attractive investment option. The ETF invests in global companies that are driving transformative innovation in robotics, automation, and artificial intelligence (RAAI), including companies that create technology to enable truly intelligent systems that can sense, process, and act, and companies that apply those technologies to deliver RAAI-enabled products — including robots — to businesses and consumers. It charges 95 bps in annual fees.
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