These are higher-risk, higher-reward ETFs.
Reflecting on 2020, there are a lot of things that many investors would like to forget — unless you happened to stake a claim in one of these top exchange-traded funds. If you did, your investment performance over the last 12 months is one thing you can celebrate. The following top-performing ETFs share a few themes, including a focus on emerging technologies across the internet, clean energy and health care. This list is also limited to ETFs with around $500 million or more in assets and funds that are not “leveraged” using sophisticated financial derivatives to amplify performance. These high-octane ETFs are tactical bets that are admittedly a bit riskier than vanilla index funds, but they have all blown away the S&P 500’s 13% gain so far this year.
O’Shares Global Internet Giants ETF (ticker: OGIG)
If you want to invest in tech stocks, you can do worse than simply going after the trillion-dollar big guys and ignoring the up-and-comers who are left to fight over the scraps. Sure, investors are often enticed by scrappy companies with long-shot hopes of becoming as dominant as Amazon.com (AMZN), Microsoft (MSFT) or Alphabet (GOOG, GOOGL). The hard reality is that these megacap tech stocks have so much cash in the bank, such dominant market shares and a downright ruthless approach to eliminating the competition. Just about the only risk they face is a government-led breakup, and that seems highly unlikely in the near future. As a result, OGIG has surged on the continued dominance of these big internet and tech names in 2020. The fund comes with an annual expense ratio of 0.48%, or $48 for every $10,000 invested.
Year-to-date return: 97%
ARK Fintech Innovation ETF (ARKF)
There’s a lot of talk about tech megatrends, including the Internet of Things, cloud computing and artificial intelligence. As this ARK fund shows, there is also a ton of promise in the emerging field of fintech, which marries Silicon Valley know-how with the lucrative industries of Wall Street, including mortgage lending and investing. Top components right now include mobile payments giant Square (SQ), Chinese tech giant Tencent Holdings and lending portal LendingTree (TREE). Together, stocks like these have done quite well, even amid the pandemic’s disruptions to the traditional economy. ARKF has an expense ratio of 0.75%.
YTD return: 99%
Global X Lithium & Battery Tech ETF (LIT)
You may think it’s odd that a metals-focused fund is among the top-performing ETFs of 2020, but that shouldn’t be a surprise when you consider how important lithium is for the modern economy. Fundamentally, lithium powers fast-charging batteries in everything from mobile devices to electric vehicles. That is evident from LIT’s top holdings, which include Tesla (TSLA) and Samsung, as well as more pure-play lithium materials companies such as Albemarle Corp. (ALB). LIT comes with an annual expense ratio of 0.75%. The fund represents the future of battery technology, and as a result, shares of this top-performing ETF have nearly doubled in 2020.
YTD return: 104%
Renaissance IPO ETF (IPO)
As the name implies, this Renaissance fund is comprised not of investments in a specific sector but rather stocks that are simply new to Wall Street. The Renaissance IPO ETF is benchmarked to newly listed public companies that hit U.S. exchanges over the last 24 months. There’s also a 10% or so cap to prevent highfliers from dominating the portfolio as they mature and dwarfing smaller new entrants to public markets. One of the top holdings right now is Zoom Video Communications (ZOOM), which went public in April 2019 and has exploded 480% higher in 2020. Other newer initial public offerings are slowly rotating in and gathering momentum to drive this fund in 2021 as Zoom approaches the date when it will roll off next year. This ETF’s expense ratio is 0.6%.
YTD return: 106%
Amplify Online Retail ETF (IBUY)
In a year of social distancing, this ETF of online retail stocks has more than doubled thanks to holding a wide array of top performers. The usual e-commerce suspects are here, along with a healthy grouping of other stocks in the space such as pet products provider Chewy (CHWY) and fashion purveyer Stitch Fix (SFIX). Beyond the short-term momentum created by the pandemic, online spending as a share of all retail continues to grow — meaning many of these stocks could continue to power higher even after vaccines roll out and economic activity returns to its pre-pandemic state. IBUY has an expense ratio of 0.65%. One thing to note, another top-performing ETF, the ProShares Online Retail ETF (ONLN), is very similar to IBUY in its portfolio makeup, strategy and returns this year.
YTD return: 115%
ARK Next Generation Internet ETF (ARKW)
When many investors look to internet stocks, they aren’t looking at old-school data service providers like Verizon Communications (VZ) or well-established e-commerce portals like Priceline and OpenTable operator Booking Holdings (BKNG). Instead, they are looking to dynamic stocks like those in this ARKW fund that represent the future of the internet. Among its top holdings you’ll find entertainment tech company Roku (ROKU) and streaming audio giant Spotify Technology (SPOT). And together, this list of about 50 up-and-coming stocks of the modern web have certainly created big profits for investors in the last year. ARKW has an expense ratio of 0.76%.
YTD return: 146%
ARK Innovation ETF (ARKK)
Though niche ETF shop ARK isn’t as well established as bigger providers such as Vanguard or iShares, it has carved out a big name for itself in 2020 thanks to popular tactical ETFs like this innovation-focused fund. You’ll find a who’s who of dynamic momentum stocks on this list, including genetic testing stock Invitae Corp. (NVTA) and telemedicine company Teladoc Health (TDOC), to name a few. There’s volatility here, as many of these names are fast-moving and burning cash on aggressive future growth plans, but as ARKK’s performance shows, there is also a ton of profit potential for owners of this top-performing ETF. The fund has an expense ratio of 0.75%.
YTD return: 146%
Invesco WilderHill Clean Energy ETF (PBW)
This Invesco fund offers a group of alternative energy stocks, such as solar and hydrogen fuel cell picks, but the lineup of about 50 stocks also includes a healthy portion of electric vehicle plays. The fund’s picks include Chinese electric vehicle company Nio (NIO) and charging network operator Blink Charging Co. (BLNK) near the top of its holdings. Some investors may think this widening of the definition of “clean energy” is just a quirk to include high-octane electric vehicle companies, but clearly that strategy has paid off in 2020. One thing to note, the First Trust Nasdaq Clean Edge Green Energy Index Fund (QCLN), is very similar to PBW in its portfolio makeup, strategy and performance this year. PBW has an expense ratio of 0.7%.
YTD return: 172%
ARK Genomic Revolution ETF (ARKG)
The right tactical ETF at just the right time, ARKG is a focused fund that is comprised of medical research companies seeking the next generation of cures and vaccines. This had always been a dynamic fund thanks to the long-term potential of experimental drugs meant to treat rare cancers or conditions like Alzheimer’s disease. But in the early days of the pandemic, as the world was impatient for a vaccine and governments fast-tracked drugs, nearly every one of the 50 or so smaller biotech stocks that make up this fund started moving higher. With positive vaccine developments in November, ARKG has powered about 30% higher in just the last month. The fund comes with an expense ratio of 0.75%.
YTD return: 184%
Invesco Solar ETF (TAN)
Another alternative energy fund that’s worth pointing out separately, TAN is unique in that it focuses solely on solar power instead of containing power grid-related players or companies that play other green energy sources such as wind or hydroelectric power. A small list of less than 30 total stocks make up this ETF, with the two bigger names Enphase Energy (ENPH) and SolarEdge Technologies (SEDG) representing about 20% of the portfolio. However, if you’re looking for a discrete play on the solar space instead of diluting your clean energy investment across tangential investments like electric vehicle stocks, TAN is the way to go — and in 2020, it has proven the power of this laser-focused strategy. The ETF has an expense ratio of 0.71%.
YTD return: 191%
Ten of the best-performing ETFs this year:
— O’Shares Global Internet Giants ETF (OGIG)
— ARK Fintech Innovation ETF (ARKF)
— Global X Lithium & Battery Tech ETF (LIT)
— Renaissance IPO ETF (IPO)
— Amplify Online Retail ETF (IBUY)
— ARK Next Generation Internet ETF (ARKW)
— ARK Innovation ETF (ARKK)
— Invesco WilderHill Clean Energy ETF (PBW)
— ARK Genomic Revolution ETF (ARKG)
— Invesco Solar ETF (TAN)
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Update 12/16/20: This slideshow was published at an earlier date and has been updated with new information.