This year’s best-perfoming exchange-traded funds.
So far, 2020 has been quite a choppy year. The huge plunge for stocks in spring was followed by a massive recovery to get back to where we started. From Jan. 1 through June 30, the S&P 500 index of large-cap stocks ended up with a modest decline of a bit more than 3%. However, some investors may be surprised to learn that there are some tactical exchange-traded funds that have logged returns of more than 40%, 80% or even 120% in the first half of the year. These ETFs are admittedly not your average index fund and come with more risk. That said, they clearly have the potential for higher returns. Here are 2020’s best-performing ETFs so far.
Amplify Online Retail ETF (ticker: IBUY)
With more than $500 million under management, IBUY is one of the largest ETFs dedicated to e-commerce stocks out there. Interestingly enough, top stocks are not the usual suspects like Amazon.com (AMZN) and instead include discounter Overstock.com (OSTK) and clothing retailer Stitch Fix (SFIX) among the top positions at present. It’s worth noting that the ProShares Online Retail ETF (ONLN) is similarly formulated and has posted a comparable performance in 2020, but it comes with only about $170 million in assets and volume that regularly dips under 100,000 shares daily, making IBUY the leader right now.
First half of 2020 return: 47%
ARK Innovation ETF (ARKK)
Everyone talks about the importance of innovation in business, but boutique ETF firm ARK is one of the few shops out there that actually has layered this philosophy into its investment offerings. This actively managed ETF stands out from typical tech index funds in that it uses internal research and judgment to identify firms with “disruptive innovation” potential. That’s evidenced in top holdings that include electric vehicle innovator Tesla (TSLA), mobile payments company Square (SQ) and online real estate platform Zillow Group (Z). All are disrupting the old way of doing business — and as all have thrived, so has ARKK in 2020.
1H 2020 return: 47%
O’Shares Global Internet Giants ETF (OGIG)
With 70 total holdings, you may think there have to be some smaller firms that unfairly get categorized as “giants” in this fund, but with a median market cap of roughly $80 billion, this terminology is justified. OGIG doesn’t bother messing around with smaller tech firms that may have growth potential but also offer risk. It instead focuses on entrenched leaders that often have near monopolies in their business lines. Think e-commerce king Amazon or enterprise tech powerhouse Microsoft Corp. (MSFT). Particularly in a digital age where scale matters, a focus on bigger firms is better for your portfolio — as evidenced by the strong returns of this ETF.
1H 2020 return: 49%
ARK Next Generation Internet ETF (ARKW)
Though the fund struggled to find a niche previously — in part because of a rather arcane label as the “Web X.0 ETF” that investors probably didn’t understand — 2020 has been a standout year for this tech fund. ARKW looks to the next generation of connectivity, beyond the obvious answers of smartphones and laptops to stocks like streaming technologies player Roku (ROKU) and social media giant Snap (SNAP). A host of internet-only ETFs cut out legacy firms like IBM (IBM), but this ARK fund goes one step further to only focus on tomorrow’s digital leaders instead of today’s entrenched Big Tech names.
1H 2020 return: 52%
ProShares Long Online/Short Stores ETF (CLIX)
A unique approach to the e-commerce surge, CLIX is designed to benefit from retail’s transformation in two ways: It owns internet retailers like other funds, but it also takes short positions against brick-and-mortar duds that haven’t got with the times just yet. About two-thirds of its assets are “long” bullish plays and one-third is “short,” where the fund bets against individual names. The upside investments include favorites like Amazon, and the short-side plays include big-box stores like Macy’s (M) and Kohls (KSS).
1H 2020 return: 52%
WisdomTree Cloud Computing Fund (WCLD)
Just as social distancing has clearly impacted consumer behavior, it also increased business reliance on cloud-based solutions to maintain operations. WCLD is a diversified play on this trend, with components that include stocks you may have heard of like Zoom Video Communications (ZM) and DocuSign (DOCU), as well as other digital tools that aren’t household names just yet. The performance in 2020 has been impressive, but many expect these technologies to thrive beyond the short term as their adoption remains “sticky” and users grow increasingly reliant on these platforms to do business even in normal times.
1H 2020 return: 57%
ARK Genomic Revolution ETF (ARKG)
The pandemic has caused plenty of disruptions, but perhaps the biggest opportunity it has created is for smaller vaccine producers racing for a treatment. The wild race for a cure has resulted in a mad dash from investors looking to capitalize on this potential, and the influx of capital into the biotech sector is best reflected via ARKG. Its components include gene editing company CRISPR Therapeutics (CRSP) and gene sequencing firm Illumina (ILMN), two key players in finding ways to develop next-generation treatments — and two of many stocks in ARKG that are thriving in the age of the pandemic.
1H 2020 return: 57%
ProShares VIX Mid-Term Futures ETF (VIXM)
VIXM only has about $60 million under management, and the similarly formulated iPath Series B S&P 500 VIX Mid-Term Futures ETN (VXZ) only commands $30 million. But both have shined in a volatile year as they are linked to the Chicago Board Options Exchange’s Volatility Index, or VIX, a popular measure of stock market sentiment based on S&P 500 options. It’s a strange chain to follow — an ETF tied to options that are placed on a basket of stocks. However, the VIX is designed to spike instantly in periods of stress. In 2020, a direct investment tied to this volatility index has paid off big-time.
1H 2020 return: 87%
iPath S&P 500 Dynamic VIX ETN (XVZ)
Another fund benchmarked to the CBOE’s VIX index is this “dynamic” product that regularly changes its allocation between short-term VIX futures and medium-term VIX futures. It’s undeniable that 2020’s generally volatile year has come across fits and starts of calm, and this fund has capitalized as it dialed up expectations of short-term volatility right before the next headline event that roiled markets. The fees are a bit steeper than the typical index fund at 0.95%, but clearly the performance has more than made up for the cost lately.
1H 2020 return: 93%
iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX)
As with the prior funds, it should be no surprise that volatility investments have been a big moneymaker this year. And the short-term funds out there include VXX, which boasts a hefty $700 million in assets under management at present, as well as similarly formulated funds like the ProShares VIX Short-Term Futures ETF (VIXY), which is only $200 million in size, and the VelocityShares Daily Long VIX Short-Term ETN (VIIX), which is only around $50 million. All have racked up returns of about 120% in the first half of the year. Again, these volatility strategies benchmarked to the VIX are incredibly risky — but they have paid off in a big way in 2020.
1H 2020 return: 124%
Ten best-performing ETFs this year:
— Amplify Online Retail ETF (IBUY)
— ARK Innovation ETF (ARKK)
— O’Shares Global Internet Giants ETF (OGIG)
— ARK Next Generation Internet ETF (ARKW)
— ProShares Long Online/Short Stores ETF (CLIX)
— WisdomTree Cloud Computing Fund (WCLD)
— ARK Genomic Revolution ETF (ARKG)
— ProShares VIX Mid-Term Futures ETF (VIXM)
— iPath S&P 500 Dynamic VIX ETN (XVZ)
— iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX)
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