If you can’t decide to buy individual stocks, picking up ETF is a good solution. An ETF is simply an instrument that collects a portfolio of selected companies with a rebalancing of the portfolio composition either monthly or over long periods to optimize performance. In this respect, these instruments are crisis proof and provide more stable returns than the individual stocks. While the usual NASDAQ or Dow Jones index tracking ETFs are in the red, there are some that recorded at least double-digit growth in the last 12 months.
Exchange Traded Funds: Main benefits
- Simple way of portfolio diversification: Instead of buying shares of one company, a single ETF can contain up to several dozen companies, plus bonds, currencies or commodity futures.
- Risk reduction: Lack of concentration on one company reduces the level of risk in the event of rapid changes to a single asset. At the same time, the potential return may also decrease, as ETFs do not fluctuate greatly, so they can be recommended especially to more conservative investors.
- Access to exotic markets: Buying stocks from the Indian or Chinese stock exchange might be difficult for retail clients. ETFs provide exposure to these exotic, but lucrative and fast-growing markets.
Now let’s take a look at the top five ETFs with double-digit returns over the past 12 months.
Invesco DB Agriculture Fund
- One of the main reasons of inflation is the rise in the prices of wholesale agricultural products, such as wheat, soybeans and even cocoa. This money goes to food producers, processors and farmers.
- The Invesco DB Agriculture Fund is one of the most popular agribusiness funds, that allows to make money on food prices increase. Food commodities are less popular than oil or precious metal, but you can’t go wrong with investing in wheat or chicken, especially in more turbulent periods in the markets. The demand for FMCGs will always exist.
- This fund includes a portfolio of the New York Stock Exchange DBIQ Diversified Agriculture Index. It currently holds futures for wheat, soybeans, sugar, coffee, and live cattle, in order of highest exposure.
- 12-Month Return: 17.96%
VanEck Oil Services ETF (OIH)
- The restriction of crude oil imports from Russia has brought huge profits to processing and distribution companies in US and Europe. This fund does not invest directly in oil, nor does it even focus on black gold mining companies. Instead, it contains sector-wide oil-related assets.
- Its portfolio includes various oil services companies from the New York Stock Exchange. such as Halliburton, and smaller companies like Cactus Wellhead, which produces oil well parts.
- Take note, that OIH excellent returns should persist, as companies will report profits in the coming months, adjusted by rising oil prices.
- 12-Month Return: 31.52%
HSBC MSCI Indonesia UCITS ETF (HIDD)
- Nobody really knows much about Indonesia, maybe except that they have good food. However, it is the second most populous country in Asia after China. Indonesia has also low taxes and a rapidly growing economy.
- It is the only Southeast Asian country in the G20 group and the 7th largest economy in terms of the ratio of GDP to PPP.
- Indonesia benefits from rich deposits of oil, natural gas, gold, copper, nickel. They also have extensive agriculture with the main export products such as rice, palm oil (now rising faster than crude), tea, coffee, cocoa and rubber. At the same time, they managed to stay away from international quarrels, that’s why they don’t make to headlines. Business doesn’t like sabre rattling.
- This fund is listed on the London Stock Exchange but denominated in dollars. It’s portfolio contains companies unknown in the West as Bank Central Asia or the mobile operator Telkom Indonesia. Currently Jakarta Stock Exchange Composite Index offers 20% yearly return, much more than the meagre results from Nasdaq or Dow Jones, not to mention big losses on Chinese stock market.
- 12-Month Return: 15.62%
iShares Global Timber & Forestry UCITS ETF (WOOD)
- Wood or timber is a raw material is mainly used in construction and producing paper, and this commodity became quite scarce all over the world. In general wood futures are growing double-digit everywhere.
- This Blackrock fund uses the S&P Global Timber & Forestry Index as benchmark, focusing on timber companies – sawmills, toolmakers or paper producers. It’s portfolio includes a wide selection of companies from different regions, making money on rising wood prices.
- Buying WOOD presents opportunity to buy the Swedish paper producer Svenska Cellulosa, the Japanese wood giant Sumitomo Foresty or American International Paper group.
- 12-month return: 7.32%
So to summarize, the choice of ETFs is huge as there are thousands to choose from and they’re available . The opportunity is especially good now, due to the temporary downturn in the stock market. Do you have any interesting ETF offers? Tell us in the comments below!