Last week, I looked at ETFs for conservative investors. But some people are more adventurous, so today 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-T). 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 overall, 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 more than 20 per cent so far this year (to April 17) and the five-year average annual return to March 31 was 15.62 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 $0.302 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-T). 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 American and global depositary receipts. There are 16 stocks in the portfolio, with the heaviest weightings in HDFC Bank Ltd. (15.79 per cent), Reliance Industries Ltd. (15.42 per cent), and Infosys Ltd. (13.69 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 8.31 per cent in the first quarter of this year. The one-year rate of return to March 31 was 20.54 per cent and the five-year average annual compound rate of return was 15.8 per cent. The MER is 0.73 per cent.
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-T). Everyone first got excited about Blockchain because it was the technology that cryptocurrencies were built on. But cryptos are fading away faster that 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. IBM says it also has important applications for healthcare, government, and numerous other 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 Corp., 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-T). 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 U.S., and Switzerland. So far, it’s been a money loser, down 12.41 per cent on an annualized basis since it was launched in November 2017. But it has look better recently, gaining 17.54 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-T). 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. As of April 18, this ETF was 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 19.86 per cent and the five-year was almost the same at 19.91 per cent. 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 extreme fragile. Be warned! The MER is 0.61 per cent.
BMO China Equity Index ETF (ZCH-T). Last year was a miserable one for Chinese stocks and this ETF reflected that by losing 16.51 per cent. This year it’s a complete reversal. ZCH was ahead 20.89 per cent as of April 17 and showing no sign of fading. Why? In large part because of one man – Donald Trump. His tweets and comments continue to suggest the U.S. 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 Depository 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.
You’re the type who wants to win big and is prepared to bet the pot to do so. You’d probably have better luck at the crap table than in putting money into ETFs, but if you prefer the stock market here are two that are as speculative as you’ll find.
Horizons Marijuana Life Sciences Index ETF (HMMJ-T). Initial sales following the legalization of cannabis in this country were disappointing. At this point, no one is quite sure where the future of this industry lies. What we do know is that an increasing number of jurisdictions are dropping their prohibitions on the sale of the drug, although some only allow it for medical purposes. In the U.S., 30 states now permit marijuana sales in some form. Michigan, Vermont, Oklahoma, Utah, and Missouri were added to that list in 2018. This fund tracks the performance of the North American Marijuana Index, net of expenses, so investors have exposure to both Canadian and U.S. producers. This ETF stumbled badly in 2018, losing almost 20 per cent. But in the first quarter of this year it was sizzling, gaining 53.21 per cent. It’s hard to imagine that trend continuing, given the weak financial results we’re seen so far from many cannabis companies. But rolling the dice on this one has paid off so far.
Horizons BetaPro Crude Oil 2X Daily Bull ETF (HOU-T). If you really want a fund that can win you a yacht or lose the house, try one of Horizons’ leveraged BetaPro ETFs. They allow you to speculate on the price direction of various commodities, including oil, natural gas, and gold. If you guess right, you’ll make a bundle. But if you guess wrong, call the movers. The swings in these funds can be wild and they need to be monitored daily. They’re not for the faint of heart. This one is for investors who believe the price of oil is heading higher. It had five straight years of losses, from 2014-18, with the biggest decline in 2017 when it dropped more than 77 per cent. But for the first quarter of this year the fund was up 63.57 per cent. Timing is everything! I wouldn’t invest a penny in it, but some people love this kind of high-stakes game – the fund has about $155-million in assets under management. The fee is excessively high for an ETF at 1.15 per cent but if you’re a high roller, what do you care?
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.
Gordon Pape is Editor and Publisher of the Internet Wealth Builder and Income Investor newsletters.