ETFs to match your investment personality, Part 2

Something for everyone

Last week, I looked at ETFs for conservative investors. But some people are more adventurous, so today we’ll concentrate on some aggressive investment personalities. All these ETFs are Canadian based.

The gains chaser

Capital gains are the priority for these investors. Dividends are secondary – what these folks really want is to see their dollars grow at an above-average rate. Here are a couple of ETFs that suit their personalities.

BMO NASDAQ 100 Equity Hedged to CAD Index ETF (TSX: ZQQ). Everyone loves U.S. tech stocks right now. Yes, some of them have had problems – Facebook, Apple, and Nvidia to name three. But overall, the sector keeps rising, and the returns from this ETF keep flowing in. After a bit of a dip in 2018, this one is ahead by more than 22% so far this year (to April 30) and the 5-year average annual compounded rate of return was 17%. You’ll find all the usual suspects in this portfolio. The most heavily-weighted holdings are Apple, Microsoft, Amazon, Facebook, and Alphabet, which together account for about 44% of the total. The fund only distributed $0.302 a unit in 2018 (one annual payment, in December). But as a gains chaser, you don’t really care about that, do you? The management expense ratio (MER) is 0.39%.

BMO India Equity Index ETF (TSX: ZID). Most of the attention these days is on China, but India has been enriching savvy investors for several years. This ETF seeks to emulate the S&P/BNY Mellon India Select DR Index, which tracks a portfolio of Indian companies that trade as Depository Receipts in New York. There are 16 stocks in the portfolio, with the heaviest weightings in HDFC Bank (15.79%), Reliance Industries (15.42%), and Infosys (13.69%). Except for a small stumble in 2016, the fund has produced healthy profits for six of the past seven years and was up 8.31% in the first quarter of this year. The one-year rate of return to April 30 was 19.5% and the 5-year average annual compounded rate of return was 15.8%. The MER is 0.73%.

The futurist

You want to be on the leading edge of new developments. You’re not worried about big gains today, it’s what’s coming that really matters. Try these ETFs.

Harvest Blockchain Technologies ETF (TSX: HBLK). Everyone first got excited about Blockchain because it was the technology that cryptocurrencies were built on. But cryptos are fading away faster that an ice cube in June, so what’s the big deal now? Banks, apparently. According to those who understand how the system works (of which I’m not one), the world financial system will eventually be built on the speedier, safer blockchain system. IBM says it also has important applications for healthcare, government, and numerous other industries. We may be starting to see evidence of that in this ETF. After a miserable start following its launch early last year, the fund has suddenly turned hot, posting a gain of almost 36% year to date to April 30. The portfolio is made up of 21 stocks including Microsoft, Visa, MasterCard, IBM, and a bunch of companies you’ve never heard of. The management fee is 0.65%.

Horizons Robotics and Automation Index ETF (TSX: RBOT). The robots are coming, the robots are coming! “They’ll steal all our jobs and leave us begging for change on street corners.” At least that’s the way the Luddites tell it. Others say that while industry is being disrupted, the end result will be the creation of more, better paying jobs. After all, someone has to design, build, service, and manage the robots. This ETF seeks to replicate the performance of the Indxx Global Robotics & Artificial Intelligence Thematic Index, so you get some AI stocks tossed into the mix as well. This is an international fund that invests mainly in Japan, the U.S., and Switzerland. So far, it’s been a money loser, down 7.3% on an annualized basis since it was launched in November 2017. But it has look better recently, gaining 26% year to date as of April 30. Robotics and artificial intelligence are clearly the twin themes of the future. But, as with the birth of the Internet, it’s hard to know at this stage which companies will prosper. The management fee is high at 0.68%.

The risk taker

You want profits, and you’re prepared to roll the dice to get them, even if that involves a high degree of risk. Here are a couple of ETFs for you.

iShares S&P/TSX Capped Information Technology Index ETF (TSX: XIT). Everyone knows U.S. tech stocks have been hot in recent years. But Canadian tech stocks? Are there any, really? Yes, there are, and right now they are doing very well. As of April 30, this ETF was ahead 33.7% year-to-date. And it has been a consistent performer. The 3-year average annual compounded rate of return to April 30 was 25.1% and the 5-year return was 21%. So what stocks are delivering those impressive numbers? The largest holdings include Shopify, CGI, Constellation Software, Open Text, and BlackBerry. A word of warning, however: Because of the small size of the Canadian tech sector, the top stocks in this portfolio have unusually heavy weightings. Shopify, CGI, and Constellation account for more than 70% of this fund’s assets. If any one of them hits the skids, the whole portfolio will plunge in value. In other words, this great performer is extreme fragile. Be warned! The MER is 0.61%.

BMO China Equity Index ETF (TSX: ZCH). Last year was a miserable one for Chinese stocks, and this ETF reflected that by losing 16.51%. This year it’s a complete reversal. ZCH was ahead 21.5% as of April 30 and showing no sign of fading. Why? In large part because of one man – Donald Trump. His tweets and comments continue to suggest the U.S. and China are close to a wide-ranging deal that will end or at least diminish the trade frictions between the two countries and boost optimism for the future growth of international commerce. If that happens, expect good things from this ETF, which tracks the performance of major Chinese companies that trade in New York as American Depository Receipts. But if the talks suddenly collapse and Mr. Trump responds with another round of tariffs, watch out. That’s the big risk here. The MER is 0.71%.

The gambler

You’re the type who wants to win big and is prepared to bet the pot to do so. You’d probably have better luck at the craps table than in putting money into ETFs, but if you prefer the stock market, here are two that are as speculative as you’ll find.

Horizons Marijuana Life Sciences Index ETF (TSX: HMMJ). Initial sales following the legalization of cannabis in this country were disappointing. At this point, no one is quite sure where the future of this industry lies. What we do know is that an increasing number of jurisdictions are dropping their prohibitions on the sale of the drug, although some only allow it for medical purposes. In the U.S., 30 states now permit marijuana sales in some form. Michigan, Vermont, Oklahoma, Utah, and Missouri were added to that list in 2018. This fund tracks the performance of the North American Marijuana Index, net of expenses, so investors have exposure to both Canadian and U.S. producers. This ETF stumbled badly in 2018, losing almost 20%. But year to date to April 30 it was sizzling, gaining 51.3%. It’s hard to imagine that trend continuing, given the weak financial results we’re seen so far from many cannabis companies. But rolling the dice on this one has paid off so far.

Horizons BetaPro Crude Oil 2X Daily Bull ETF (TSX: HOU). If you really want a fund that can win you a yacht or lose the house, try one of Horizons’ leveraged BetaPro ETFs. They allow you to speculate on the price direction of various commodities, including oil, natural gas, and gold. If you guess right, you’ll make a bundle. But if you guess wrong, call the movers. The swings in these funds can be wild and they need to be monitored daily. They’re not for the faint of heart. This one is for investors who believe the price of oil is heading higher. It had five straight years of losses, from 2014-18, with the biggest decline in 2017 when it dropped more than 77%. But year to date to April 30 the fund was up 83.3%. Timing is everything! I wouldn’t invest a penny in it, but some people love this kind of high-stakes game – the fund has about $155 million in assets under management. The fee is excessively high for an ETF at 1.15% but if you’re a high roller, what do you care?

With more than 700 ETFs to choose from, finding those that best suit your investment profile can be a challenge. But if you understand your investment personality, the process becomes a lot easier. Just remember the old investment maxim: Past returns are no guarantee of future results.

Gordon Pape is one of Canada’s best-known personal finance commentators and investment experts. He is the publisher of The Internet Wealth Builder and The Income Investor newsletters, which are available through the Building Wealth website. This column originally appeared in The Toronto Star.

For more information on subscriptions to Gordon Pape’s newsletters, check the Building Wealth website.

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Notes and Disclaimer

The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting, or tax advice. Always seek advice from your own financial advisor before making investment decisions.