3 ETFs (Exchange Traded Funds) Aggressive Growth Investors Should Own
While it’s nice to consistently pick stocks that pull the moon, the reality is that most investors will have both aggressive hits and misses in their portfolios over time. Some will swing and miss more often than they should. Also, if you search in the right industry but fail to pick the right stock, your performance can be a big disappointment if you had simply invested in a more diversified way.
Enter the ETF
An ETF, or exchange-traded fund, is a basket of stocks that works like a traditional open-ended mutual fund, but trades on a stock market. Therefore, you will need a broker to own one.
The growth of the ETF space has been monumental over the past two decades. BlackRock, Inc. The iShares ETF franchise itself offers hundreds of options. Outside of iShares, you can own ETFs from dozens of other sponsors with seemingly limitless investment strategies for generally minimal annual expenses.
The ETF can meet the basic needs of investors through products such as indices and more conservative dividend growth portfolios. But the ETF can also offer targeted satellite exposure for those lacking specific sector expertise or in cases where the investor is looking for a simple solution to increase portfolio diversification.
3 ETFs – 3 sponsors – 3 aggressive, but different investment paths
Today I am going to mention 3 funds that correspond to this latter level of service and should only be considered by aggressive long term investors or traders potentially willing to move in and out of what will likely be quite volatile future prices. .
BBH – VanEck Vectors Biotech ETF – This ETF is made up of around 25 companies involved in the development of drugs intended to improve the length and quality of life. Market-weighted, the fund offers exposure to mega-capitalization biotechnologies like Amgen, Gilead and Celgene (~ 28% of assets), but also to smaller names with probably greater growth potential.
Just to show how much of a difference in performance there can be in the same space, consider the fact that if you bought Gilead (GILD) – and just Gilead – about a year ago, when it was peaking at $ 111 per share, you would be down 30 percent today based on that decision. On the flip side, if, instead of Gilead, you had bought Medivation (MDVN), a little-known cancer drug developer, you would have doubled your money with the company taken over by Pfizer earlier in the year.
While you wouldn’t have doubled your money by owning BBH, in fact, you lost money in the past year, but not that much if you just owned Gilead.
FDN – First Trust Dow Jones Internet Index Fund – Like BBH, FDN is a market capitalization weighted fund, but currently has a dozen additional holdings. The fund focuses on companies that generate at least 50% of their income from Internet operations. You will be exposed to common suspects like Amazon, Facebook, Alphabet, eBay, and Yahoo !, but also smaller cap companies like Akamai, TrueCar, and Rackspace Hosting.
Finally, I will mention FGJ – PowerShares Golden Dragon China Wallet – While Chinese equities have struggled in the short term, this fund has a good track record of performance and has an interesting mix of exposure to technology and consumer discretionary. Despite its many challenges, I think it is a country that the aggressive investor should consider owning for the long term.
ETF space continues to be a convenient and cost effective method for DIY enthusiasts to build and diversify investment portfolios. While BBH, FDN, and FGJ are not for everyone, I would consider this trifecta to be an aggressive and diverse core for many. With around 100 stocks spread across three different investment platforms, its diversity mitigates some risks. Nonetheless, given the foamy general valuations found in today’s markets, combined with the generally high beta (volatility) found in these spaces, this should not be viewed as a full investment program. An average dollar cost approach may be well advised if you are considering a position today.
Adam Aloisi was long shares of BLK, FDN and BBH at the time of writing, but positions are subject to change at any time.
Warning: The above should not be taken or interpreted as individualized or specific investment advice. Do your own research and consult a professional, if necessary, before making any investment decisions.