Think like a portfolio manager, and consider capitalizing on megatrend ETFs

We talked about megatrends  in our 2021 outlook article, so let's follow up here and answer the following question; how can I invest in a broad portfolio of underlying megatrend companies ?

Below is example of how you might be able to do just that through ETFs that specialize in your sector of interest. 

Clean Energy

ESG is all things Environmental, Sustainable, and Governance related and has been seeing large investments in the recent years. The pitch for ESG investing is that in the future, considering the current business trends and government promises, companies not complying with ESG will suffer and those in line with objectives will thrive. 

iShares Global Clean Energy ETF (ICLN) is one ticket to the ESG future. In the last 10 years, this ETF has generated 8.72% in compound annual returns, and in 2020 the portfolio granted 0.83% dividend yield. Another way to look at this ETF is that the person who invested $1000 ten years ago now has $2308.20 with a total return of 130.82%. 

 

ICLN returns

One caveat is the extreme rise in 2020 which skews the entire result. As you can see in the seasonality table below, 1 / 3 of the best monthly performances occurred in 2020 and none of the worst loses occurred in 2020.     

ICLN returns

What we see in the following table shows you the breakdown of the performance over a certain investment period, where for example 3Y equals the return you would have today assuming you had invested 3 years ago.

 

ICLN returns

 

The following companies are the top five most heavily weighted companies in the portfolio, and you can also just pick and chose companies you like from this large portfolio and build up your own estate.

 

ICLN portfolio

Robots & AI 

If you read about AI and robotic innovations in our mega trend article and watched the Boston Robotics dancing video , and finally realized that the future is now, go ahead and continue reading about an ETF called BOTZ; 

 

BOTZ returns

The BOTZ ETF began in 2016 and has performed relatively well. On $1000 dollars invested on the first day of 2017, you would have only seen a positive return on your money. Let's see the breakdown of your returns this month assuming you had invested in the prior periods figured below; 

BOTY returns by period

 

Another interesting breakdown is month by month returns for BOTZ going back four years. 2018 was a rough year for the ETF following an outstanding debut. It may be too soon to observe any proper trends as BOTZ management might still be fine-tuning its strategy for the long run. 

BOTZ monthly

And the top ten holdings;

 

BOTZ weights


Global Infrastructure

We talked about global infrastructure potentially kicking into gear, and so you might be wondering how you can capitalize on a growing global infrastructure. iShares Global Infrastructure is an option in the ETF world, and its main focus is on the developing world which offers a narrower investment profile.

Apparently, April is the best month to own this ETF with a 3.1% average return for the past 12 years. You can program in a special order to buy on the first and sell on the last day of April or add it your calendar.

 

monthly returns global infrastructure

 

Aside from a quick April grab and go, the seasonality on this ETF shows really low returns on a average monthly basis so don't try other months (on average). But anyhow, the yearly return is what truly matters as the yearly return numbers you see above are summed up each month to make the compounded yearly returns you see in the graph below:

 

return for  GI

 

And if you are looking for some inspiration here are the top ten holdings of this ETF. We are seeing a relatively well diversified portfolio meaning there are no outlandish weights in one company. However, this ETF is heavily invested in the transportation infrastructure at 41.72% and the rest is shared between Utilities and Energy at 38.51% and 19.14% respectively.  

GI portfolio

 

Conclusion

Exchange traded funds (ETFs) exists to supply you with new stock investment ideas, or pre-made portfolios you can easily invest in. Considering our research about the future, mainly regarding AI & Robotics, Global Infrastructure and Green Investing, you could see those ETFs above (or other similar competing ETFs) as a manner in which to invest your capital. Each one offers pros and cons worth your attention and deciding on where to invest should be based on clear and truthful data, and your beliefs about the future.

 

 

Sources:

Lazyportfolioetf.com

https://www.ishares.com/us/products/239738/ishares-global-clean-energy-etf

https://www.globalxetfs.com/funds/botz/?utm_source=google&utm_medium=cpc&utm_content=botz&gclid=Cj0KCQiArvX_BRCyARIsAKsnTxMus3uGA_8XRdufuNkzWqx_y-8-46c9enrtHLddrhSvBHvGeg4_ZKQaAhxWEALw_wcB

 

Blogposts, newsletters, podcasts and any other content published by FlowBank SA (hereinafter “FlowBank”) reflect the opinions of the authors only and do not reflect the views of Flowbank or any of its subsidiaries or affiliates. These contents are meant for informational purposes only and aim to offer new ideas and perspectives. They are not intended to serve as a recommendation to buy or sell any type of financial instrument, whether that be through a Flowbank account or any other trading account. They are not to be considered as research reports and are not intended to form the basis of any investment decision. Any third-party opinion expressed, and information provided therein do not reflect the views of Flowbank or of any of its subsidiaries or affiliates. We emphasize that all investments involve risk, and past results are not a guarantee of future performance. While diversification does help to lower and spread the risk, it does not ensure a protection against loss. Investing in securities or other financial products always involve a risk of losing money. Prices fluctuate with the market in sometimes unpredictable ways, and investors should be aware that their losses might exceed their initial deposit. Flowbank SA, a FINMA regulated company.

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