Exchange traded funds remain the leading method for retail investors to gain broad exposure to specific industries, asset classes and investment products. They provide the means for diversification within the portfolio in a cost efficient manner while facilitating diversification within the target investment universe that typically would only be possible with a very large account. The best part is that many ETFs provide market beating performance, market beating distributions, lower volatility or a combination of all three. Here is a list of 5 such ETFs expected to deliver results in 2017.
My top pick for 2017 is the Purefunds ISE Cyber Security ETF (NYSEARCA:HACK). If you are not aware, cyber security is a top concern for IT specialists and corporations as the number of online attacks grows exponentially. As each new threat is countered the hackers and cyber criminals get more sophisticated which makes security one of the hottest sectors in tech. The Cyber Security ETF invests in companies like Checkpoint (NYSE:CKP), Palo Alto Networks (NYSE:PANW), Science Applications International Corp (NYSE:SAIC) and Cisco Systems (NASDAQ:CSCO), the nations leading cyber security experts. If Cisco's calendar Q1 earnings are any indication the entire sector is going to outperform this year. The fund yield a little more than 1% when trading at $30.
The S&P 500 High Dividend Low Volatility ETF (NYSEARCA:SPHD) combines the best features of the S&P 500, seeking out the highest stocks with the lowest volatility. Fund methodology starts out with the top 75 paying stocks in the index and then whittles out the 25 with the highest volatility delivering a portfolio that outperformed the broader index by more than 10% in 2017, and paying a better dividend. At current prices the ETF yields nearly 4%, or $1.53, annually. In terms of sector and diversification the fund is roughly 18% utilities, 15% industrials, 13% real estate and 11% infotech with no more than 10 stocks per sector, if even that many.
If one thing is certain about technology it is that it is taking over the world. The Internet of Things is expected to have more than 50 billion connected devices, more than 6 per person, by 2020 and that means one thing; semi-conductors. The Powershares Dynamic Semi-conductor Portfolio ETF (NYSEARCA:PSI) is a mid-cap growth fund targeting leaders and innovators within the semi-conductor sector. The fund invests in companies like Intel (NASDAQ:INTC) and Nvidia (NASDAQ:NVDA) as well as lesser known names like Inphi Corp (NYSE:IPHI), a major player in the telecommunications space. The fund pays an annual dividend once per year at a rate near 0.5%, small but mitigated by the fact share prices have double in the last year.
This year President Donald Trump is expected to boost military spending to a level not seen in decades, if ever before. This means an increase in activity among military contractors, and that means profits and dividends for investors. The SPDR S&P Aerospace & Defense ETF (NYSEARCA:XAR) is my pick in this space. It is diversified with nearly equal weighting across the broad spectrum of defense stocks and classified as a mid-cap blended fund by Morningstar with a 5 star rating. The fund distributes dividends biannually at a rate of 1.10% per year when trading near $70.
The Powershares S&P Small Cap Low Volatility ETF (NYSEARCA:XSLV) is a fund focuses on small cap companies with a goal of providing current income while offering lower volatility than the broader small cap universe. The fund pays a quarterly dividend with an annualized rate of $0.89, or 2.05% when trading near $42. The fund is a blend of value and growth and carries a 5 star Morningstar rating. Top sectors held within the portfolio include regional financials, real estate, natural resources and food service.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.