Expenses, manager expertise and strategy are important factors with new ETFs.
Exchange-traded funds can be an inexpensive and easy way to invest, but newer ETFs, like any new investment, carry greater risk. Since new ETFs haven’t necessarily had time to prove themselves with long track records, it’s important to pay attention to fees and the fund’s investment objective. You can also review the fund manager’s experience managing other investments to get a sense of his or her skill. Keeping that in mind, here are eight new ETFs to buy, and a little background on these newcomers to the fund world.
FT CBOE Vest U.S. Equity Buffer ETF (ticker: FSEP)
The FT CBOE Vest U.S. Equity Buffer ETF is another take on the S&P 500 that aims to shelter investors from the first 10% of downside losses in exchange for a cap on your upside potential. “The cap and the buffer reset annually during September but can be held indefinitely,” says Ethan Lam, a senior portfolio associate at SEIA. The cap is currently set to 12.2%, which equates to 11.35% after fees are taken into account. “These types of ETFs may work well for investors who are looking to participate in the equity market and anticipating moderate market returns without assuming full downside risk,” Lam says.
PIMCO Municipal Income Opportunities (MINO)
PIMCO launched its first actively managed municipal bond ETF, MINO, in September 2021. “Run by an experienced team and available at an attractive price point of 0.39%, this strategy seeks to offer investors higher tax-advantaged income with total return potential,” says Christine Sol, an investment strategist at SEIA. “The fund can invest up to 30% in high yield and exhibits more defensive properties than a typical muni high yield fund.” She says MINO is best suited for investors who want “tax advantaged income and are willing to accept more risk than a traditional core muni strategy.”
Cambria Foreign Shareholder Yield ETF (FYLD)
Investors often focus on dividend yield as a proxy for shareholder value, says Chris Berkel, investment adviser and founder of AXIS Financial. “Cambria’s Foreign Shareholder Yield fund takes that idea a step further and looks at all forms of return of value to shareholders through dividends and stock buybacks.” Unlike other developed international funds, FYLD looks for undervalued businesses within undervalued countries, so you’ll get exposure to parts of the developed world you might not find in a typical developed-world ex-U.S. fund, he says. “This part of the international market seems to have been largely overlooked and on a fundamental basis looks very inexpensive compared to the United States,” Berkel says.
WisdomTree Alternative Income Fund (HYIN)
“In a world with low and declining yields, investors are left with very little opportunity in traditional fixed income,” Berkel says. To address this, WisdomTree launched HYIN in May to give retail investors access to alternative credit, an area previously only available to ultra-high-net-worth and institutional investors. HYIN “focuses on misunderstood credit-related funds like business development companies and specialty REITs,” Berkel says. “It’s an interesting way to achieve higher than average yields; however, those yields come with increased risks.” It also comes with a hefty price tag at a 3.2% expense ratio. Berkel recommends consulting with a financial professional before adding this new ETF to your portfolio.
ProShares S&P Technology Dividend Aristocrats ETF (TDV)
Launched in late 2019, TDV provides diversified exposure to growing dividend payers, says Todd Rosenbluth, head of ETF and mutual fund research at CFRA, a New York-based investment research company. Companies included in the ETF must have increased dividends for at least seven consecutive years. The one-year return is 35.44% with an expense ratio of 0.46%. With only 37 total holdings, it’s not the most diversified ETF, but no single company represents more than 3.21% of the portfolio.
Vanguard U.S. Multifactor Fund ETF (VFMF)
The Vanguard U.S. Multifactor Fund ETF is a midcap blend ETF that listed in 2018 and invests in stocks by targeting value, momentum and quality after an initial volatility screen. The expense ratio is 0.19%, and the year-to-date return is 22.6%. ETFs generally have lower costs with most under 1% and are more tax efficient than mutual funds. Investors should also familiarize themselves with the sponsor of the ETF, which is the investment company behind the ETF. In the case of VFMF, you’re looking at Vanguard, a company with a long and worthy track record, as your fund sponsor.
Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF (GSLC)
The Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF is a large-blend ETF with a one-year return of 27.87% and a year-to-date return of 16.05%. With an expense ratio of only 0.09%, it’s one of the cheapest funds on this list. Active beta ETFs seek to find stocks of good value, strong momentum, high quality and low volatility. Investors should look at the difference between the record of the underlying index and the newer ETF’s record. When the fund strays too far from the underlying index, you may want to find another option that more closely aligns with its target. This is especially true for newer ETFs because as fun as it may be to get in on a new trend, you want to be able to trust that the managers will hold true to their long-term strategy.
ProShares Bitcoin Strategy ETF (BITO)
The freshest of the new ETFs to buy is the first-of-its-kind bitcoin ETF, debuting Oct. 19. Although it won’t technically track the current spot price of bitcoin, it will track the price of futures tied to the leading cryptocurrency. Investors more comfortable with owning traditional ETFs can gain meaningful, if indirect, exposure to the digital asset by buying BITO, which will likely see heavy investor demand and high liquidity. The expense ratio, at 0.95%, isn’t great, but for folks who may be uncomfortable with buying Bitcoin directly through an exchange like Coinbase Global Inc. (COIN), BITO should prove to be a perfectly serviceable and accessible substitute.
Eight best new ETFs to buy:
— FT CBOE Vest U.S. Equity Buffer ETF (ticker: FSEP)
— PIMCO Municipal Income Opportunities (MINO)
— Cambria Foreign Shareholder Yield ETF (FYLD)
— WisdomTree Alternative Income Fund (HYIN)
— ProShares S&P Technology Dividend Aristocrats ETF (TDV)
— Vanguard U.S. Multifactor Fund ETF (VFMF)
— Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF (GSLC)
— ProShares Bitcoin Strategy ETF (BITO)
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