While picking individual stocks can be rewarding, so too can be identifying industries that are likely to outperform the broader economy via exchange traded funds, or ETFs. These investments can be a relatively low-cost way to participate in some of the world’s most promising growth areas such as 5G networking, electric vehicles, clean energy, and much more.
Thankfully, nowadays there is seemingly an ETF for everything. Investors looking for broad exposure to what are likely to be some of the hottest themes in 2021 should look no further than these three funds:
Is There a Strong Infrastructure ETF?
President Biden has made clear his intention to deploy heavy funding towards infrastructure investment to promote growth and put the U.S. in a better position to compete globally. This could include spending on roads, bridges, water systems, electricity, and 5G infrastructure. And while other leaders have made similar vows in the past only to fall short, a Democrat-controlled government suggests Biden may make some inroads.
A great way to play the domestic infrastructure theme is the iShares U.S. Infrastructure ETF (IFRA). This a well-diversified fund of more than 130 stocks that are positioned to benefit from a rise in infrastructure related activity. It is a mostly a mix of utility, industrial, and materials companies that together account for approximately 95% of the portfolio.
Names like progressive utility company Nextera and electricity leader Avista provide exposure to the development of renewable energy infrastructure. Then there is Cleveland Cliffs, a leading U.S. mining company which is largely focused on steel production.
Last year the ETF was up a modest 7.3% and lagged the broader market. But with the prospect of increased infrastructure activity here at home, the time is now for these companies to capitalize. The fund has a reasonable 0.40% expense ratio and should be built into a long-term portfolio strategy.
What is a Good Way to Invest in Clean Energy?
Along the same lines, clean energy is expected to be near the top of the new administration’s agenda. President Biden wasted no time in making this priority clear by revoking a permit for the Keystone XL oil pipeline on his first day in office.
He has also made clear his plans to move towards the goal of making the U.S. a net zero emission economy by 2050. This could involve a ten-year, $400 billion investment in clean energy and innovation.
While this is a certainly a long time to wait for climate change action, we have already seen the market gravitate towards clean energy stocks. The iShares Global Clean Energy ETF (ICLN) has been a popular way to play the clean energy space.
There are other clean energy funds out there, but what stands out about this ETF is its global nature. A push towards clean energy is clearly a common goal for most countries and one that will take cooperation on a worldwide scale. The 30 stocks in the fund represent a nice mix of the leading renewable energy companies that are making a difference.
Investing in ICLN gives the investor exposure to solar, wind, and other green energy plays. Emerging electric vehicle power company Plug Power is the top holding. The maker of hydrogen and fuel cell technology has a huge growth opportunity ahead in the EV space and across several industrial markets.
Given the huge run in this stock investors that may think it’s too hot to touch here could gain exposure by investing in the diversified ICLN ETF. The fund surged 141% in 2020 but is still trading below where it was when it launched in June 2008. Look for it to charge higher in 2021.
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