Investors are often warned to avoid emotions, whether they arise from market dips or upswings.
Following one’s passions, however, could be another thing. A growing list of special-purpose ETFs allow you to focus on greening the Earth, endorsing a healthy lifestyle or promoting gender diversity. Their ticker symbols reflect their values and beliefs – SLIM, ICAN and SHE.
Experts caution that these ETFs are quite new, however, and they inherently lack diversity, which is critical to a well-rounded portfolio.
“Most people are more passionate about whether they can make money fast than about supporting a cause,” says Carien Jutting, a certified financial planner and president of Fiscal Wellness Inc. in Stratford, Ont.
She’s concerned that the specialty funds are “all about marketing,” noting that many of them are “not your big fat dividend payers” but tend to be pure high-growth plays. Many are also not balanced enough and can be short-lived, she notes. She likes to see a track record of at least five years for many investments, and these funds are just too new for that.
Adrian Mastracci, senior portfolio manager and financial advisor at Lycos Asset Management Inc. in Vancouver, says it’s important to be somewhat dispassionate in investing, even about these intriguing funds.
“As long as you’re attached to something like stocks, you’re probably not going to make a logical decision, which is what investing is about,” he says. “Mixing your passions along with your investing is a tall order. It’s very hard to get both right.”
Mr. Mastracci suggests that investors with less than $100,000 in their portfolios stay away from these “bandwagon” ETFs, while those with $500,000 or more can invest perhaps 5 to 10 per cent in such areas, as long as the funds fit their plans.
He adds that it’s possible to buy stocks individually in companies that support special causes.
All that said, here are some ETFs to be passionate about.
The RBC Vision Women’s Leadership MSCI Canada Index ETF (RLDR) is a new Canadian fund that supports companies that demonstrate a commitment to women’s leadership. Trading on the Aequitas NEO Exchange, it includes a broad range of companies in Canada that have demonstrated a commitment to gender diversity as part of their corporate social responsibility strategy. Mr. Mastracci notes that the fund is too new to have a track record but it includes solid holdings such as the five major Canadian banks, Enbridge Inc., Nutrien Ltd. and Transcanada Corp.
The SPDR SSGA Gender Diversity Index ETF (SHE) tracks large-cap U.S. companies that employ a relatively large proportion of women in high-level leadership roles. It evaluates the ratio of women in executive and director positions. The result is a wide range of holdings, mostly large progressive firms in a range of sectors. Ms. Jutting notes that this gives investors a fair bit of diversity, although buyers might already hold some of these stocks separately or in other funds, “so be careful you’re not duplicating something.” SHE also has good growth and a decent distribution yield, she says.
The InsightShares LGBT Employment Equality ETF (PRID), created and offered by Exchange Traded Concepts LLC, invests in companies that promote equality for lesbian, gay, bisexual and transgender employees in the workplace. It tracks the price movements of U.S. companies that offer LGBT equality through their policies, as measured by their score in the Human Rights Campaign Foundation’s Corporate Equality Index. Mr. Mastracci notes that while such values are admirable, PRID just started in January, and it’s better to give new funds “time to simmer” before taking the plunge. “I typically don’t invest in something that’s very fresh.”
A number of ETFs invest in companies engaged in alternative energy production and research. Some focus on renewables, such as the First Trust Nasdaq Clean Edge Green Energy ETF (QCLN), while others offer a more narrow part of the industry. For example, the ISE Global Wind Energy Index Fund (FAN), as its name suggests, tracks an index of wind-energy companies.
Fitness and health
Janus Henderson Investors has a series of ETFs that emphasize weight loss, fitness and health-related stocks, such as the Obesity ETF (SLIM), with the tagline “Invest in the Battle Against Obesity.” Mr. Mastracci says that he is “all for what it stands for, keeping the weight down, but just because I’m passionate about it doesn’t make it a good investment.”
Janus also offers an Organics ETF (ORG), which includes companies that service, produce, distribute, market or sell organic food, beverages, cosmetics, supplements or packaging.
Do the right thing
Big companies that “do good” for their communities and the environment are included in the SerenityShares Impact ETF (ICAN). Holdings range from Alphabet Inc. and Apple Inc. to Danaher Corp., the science and technology innovator. These firms focus on issues that make the world a better place, such as elder care, renewable energy and recycling. Ms. Jutting says the fund, which is just a year old, is “a novel concept” but quite small and thinly traded. “The concept behind it all is fantastic,” she adds, with diversity and pure growth, but people might find these holdings elsewhere in their portfolios.