There are more than 5,000 exchange traded products in the U.S., allowing investors to access a variety of asset classes and easily invest with a specific strategy in mind.
Though the array of choices can be confusing, the truth is that what worked yesterday on Wall Street may not work tomorrow. Sometimes identifying the best exchange traded funds involves looking beyond the biggest or oldest ETFs and toward new entrants with a unique investing approach.
Not every ETF will attract enough money to stay viable in the long run, however these recent entrants are interesting examples of opportunities some fund managers see beyond the old universe of exchange traded products.
Innovator S&P 500 Buffer ETF
Part of a series that launched this year, the debut of BJAN brought a "defined outcome" flavor to the family of ETFs that are benchmarked in some way to the popular S&P 500 (.SPX). The Innovator ETF seeks to track the S&P 500’s return – but only to a predetermined cap. The fund then shields investors against the first 9% of losses during a yearlong period. The idea is quirky but may appeal to investors OK with giving up a bit of their upside in exchange for protection from declines. In addition to BJAN, which offers the buffer period from January to January, the Innovator S&P 500 Buffer ETF August (BAUG) fund has an outcome period from August 2019 to August 2020.
Direxion MSCI Developed Over Emerging Markets ETF
Some investors aren't keen to embrace emerging markets, instead of putting in "developed" market funds that play regions like Europe and Japan. But what if you think riskier emerging markets are set to go down the tubes? In this case, RWDE offers a "pair trade" that allows for 150% long exposure to developed world markets index across Europe, Australia and the Far East and 50% short exposure to emerging markets like Brazil and China. This ETF favors developed over emerging markets. In this age of trade wars and uncertainty, RWDE is an interesting tool that some could find useful. It's also part of a thematic family launched by Direxion this year, including Direxion MSCI Defensives Over Cyclicals ETF (RWDC).
ARK Fintech Innovation ETF
Smaller and more tactical ETF shop ARK Invest continues to build out its portfolio of funds targeting next-generation trends via this fintech-focused offering that invests in global opportunities that are leading the charge on financial technology innovation. That includes mobile payments companies like Square (SQ), online real estate portal Zillow Group (Z) and Chinese e-commerce platform Pinduoduo (PDD). While only about seven months old, the fund has already gathered more than $70 million in assets, hinting that this niche product has launched at the right time to meet investor demand.
Goldman Sachs Motif New Age Consumer ETF
Motif is an innovative financial firm that is part broker and part data science. The company builds financial products using artificial intelligence and other high tech tools to create investing "motifs" that may not be otherwise available. At least, that was the theory until Goldman Sachs came along and launched a family of funds, including GBUY, which is a play on changing consumer behaviors. There are no stodgy retail stocks here. Holdings include travel portal Booking Holdings (BKNG) and Chinese e-commerce giant Tencent Holdings (TCEHY). There are several other Goldman-Motif funds that launched around the same time, too, such as the Goldman Sachs Motif Data-Driven World ETF (GDAT), an ETF focused on big data trends.
Defiance Next Gen Connectivity ETF
Speaking of next generation trends, the FIVG fund is an ETF focused on telecoms that looks to capitalize on the seemingly perpetual upgrade cycle of global wireless technology as society becomes increasingly connected and increasingly dependent on data. Whether it's bringing emerging markets and rural regions into a high-speed internet age or simply upgrading 4G to 5G and beyond, the components of this ETF are at the center of the modern communications industry. These include obvious players like AT&T (T) and Verizon Communications (VZ) but also service and hardware firms like Analog Devices (ADI) and Skyworks Solutions Inc. (SWKS).
JPMorgan BetaBuilders 1-5 Year U.S. Aggregate Bond ETF
You may be wondering why, after all these unique and innovative funds, it's worth talking about a short term bond fund that yields around 2% and is comprised of U.S. Treasurys, municipal bonds and corporate debt from top-rated firms like JPMorgan Chase & Co. (JPM). What is so noteworthy is that BBSA is small – at least, when it comes to fees. With an annual expense ratio of 0.05%, or just $5 annually on every $10,000 invested, JPMorgan aims to compete by undercutting low-cost funds instead of inventing clever products that may not have an audience. BBSA is the latest in its BetaBuilders family, joining its JPMorgan BetaBuilders U.S. Equity ETF (BBUS), the cheapest large cap fund at present.
MicroSectors U.S. Big Oil Index Inverse ETN
The energy sector is seeing upheaval in the age of climate change. Investors have many green energy funds to pick from, but MicroSectors has taken it one step further with "inverse" ETFs that bet against big oil stocks. The shop has created an index of the 10 largest energy companies including Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX), and YGRN bets against that index. Microsectors has other offerings, such as "leveraged" funds that offer a much as three times the performance of the underlying stocks in a bullish or bearish direction. But the general idea is simple and may appeal to tactical traders: Why mess with a big energy sector when the 10 biggest companies are in many ways all that matter.
Procure Space ETF
You have to award big points for a creative ticker here since the fund is all about the future of private space travel. It's the first under the Procure brand, but is a unique take on next generation opportunities that the larger fund outfits haven't really pursued yet. The idea is to benchmark the fund to stocks that generate the majority of revenues from businesses that are currently used or could be used in space. This includes traditional aerospace companies like Lockheed Martin Corp. (LMT), as well as less obvious plays like GPS operator Trimble (TRMB).
The Acquirers Fund
Very different from some of the sector specific plays, The Acquirer's Fund is a "deep value" ETF that holds long positions in stocks it sees as undervalued, and thus strong candidates for activist investors or even buyouts. But it doesn't stop there, also taking short positions in overvalued companies it sees as financially weak and likely to underperform. This kind of pair trade can be a good bet when it's clear that some stocks are struggling mightily and others continue to grind higher despite market uncertainty. This ETF only launched a few months ago, so time will tell.