Wall Street closed the books on 2020 with a decidedly good year for U.S. stocks. But as is so often the case, your performance varied significantly depending on what you owned.
I’m not talking about stock-picking; picking the “right” index was just as important. Consider that for the year, the Nasdaq-100
NDX
increased roughly 44%, its fifth-best year ever. The S&P 500
SPX
had a pretty good year too, but its returns of about 16% were only roughly a third of the Nasdaq-100’s gains. Lagging even farther behind was the Dow Jones Industrial Average
DJIA,
up only 7% on the year.
The root cause lies in the fact that the Nasdaq-100 has more than 40% of its assets in tech and only about 2% in financial services. Full diversification obviously reduces your risk, but also prohibits you from notching big gains.
So if you’re looking for outperformance in 2021, it may be worth biasing your portfolio just a bit toward a high-growth sector. It doesn’t have to be something as vanilla as “technology,” as a universe of sophisticated funds allow investors to zero in specific trends without buying individual stocks.
Here are five such tactical sector funds that may be worth
looking into to tap into significant outperformance over your standard index
funds.
Marijuana ETFs
In November, voters in New Jersey, Arizona, Montana and South Dakota legalized recreational marijuana in their states. That makes 15 states and Washington, D.C., that have legalized marijuana for adults — and 36 states that allow medicinal use of marijuana. Furthermore, incoming President Joe Biden has embraced the notion of decriminalizing possession at the federal level.
This trend has captivated many investors, but volatility in
individual stocks has means you could be in for a wild ride as the emerging
cannabis industry struggles through its growing pains. After all, many dot-com
stocks didn’t make it thanks to misreading the market or being outmaneuvered
out by competitors. For those interested in playing this broader trend, then, a
basket of marijuana stocks rounded up in an ETF could be just the ticket.
Among the funds in the marijuana space, the ETFMG Alternative Harvest ETF
MJ
is the largest and most established with almost $1 billion in assets. Its biggest holdings include Aphria
APHA
and Canopy Growth
CGC.
In 2020, this ETF fell 11.6%, after taking into account reinvested dividends.
A new and fast-growing ETF worth a look is direct the AdvisorShares Pure US Cannabis ETF
MSOS
that launched in September. It is actively managed and includes indirectly related companies, microcap marijuana startups and other interesting twists on this trend. The ETF is reasonably established with $250 million in assets, and could be worth a look for those looking to cast a wider net on the sector.
Read: Cannabis stocks stage strong rally as prospect of Democratic…
Read More: 5 high-growth themes and the stock-market ETFs that can deliver big
5 high-growth themes and the stock-market ETFs that can deliver big
Wall Street closed the books on 2020 with a decidedly good year for U.S. stocks. But as is so often the case, your performance varied significantly depending on what you owned.
I’m not talking about stock-picking; picking the “right” index was just as important. Consider that for the year, the Nasdaq-100
NDX
increased roughly 44%, its fifth-best year ever. The S&P 500
SPX
had a pretty good year too, but its returns of about 16% were only roughly a third of the Nasdaq-100’s gains. Lagging even farther behind was the Dow Jones Industrial Average
DJIA,
up only 7% on the year.
The root cause lies in the fact that the Nasdaq-100 has more than 40% of its assets in tech and only about 2% in financial services. Full diversification obviously reduces your risk, but also prohibits you from notching big gains.
So if you’re looking for outperformance in 2021, it may be worth biasing your portfolio just a bit toward a high-growth sector. It doesn’t have to be something as vanilla as “technology,” as a universe of sophisticated funds allow investors to zero in specific trends without buying individual stocks.
Here are five such tactical sector funds that may be worth
looking into to tap into significant outperformance over your standard index
funds.
Marijuana ETFs
In November, voters in New Jersey, Arizona, Montana and South Dakota legalized recreational marijuana in their states. That makes 15 states and Washington, D.C., that have legalized marijuana for adults — and 36 states that allow medicinal use of marijuana. Furthermore, incoming President Joe Biden has embraced the notion of decriminalizing possession at the federal level.
This trend has captivated many investors, but volatility in
individual stocks has means you could be in for a wild ride as the emerging
cannabis industry struggles through its growing pains. After all, many dot-com
stocks didn’t make it thanks to misreading the market or being outmaneuvered
out by competitors. For those interested in playing this broader trend, then, a
basket of marijuana stocks rounded up in an ETF could be just the ticket.
Among the funds in the marijuana space, the ETFMG Alternative Harvest ETF
MJ
is the largest and most established with almost $1 billion in assets. Its biggest holdings include Aphria
APHA
and Canopy Growth
CGC.
In 2020, this ETF fell 11.6%, after taking into account reinvested dividends.
A new and fast-growing ETF worth a look is direct the AdvisorShares Pure US Cannabis ETF
MSOS
that launched in September. It is actively managed and includes indirectly related companies, microcap marijuana startups and other interesting twists on this trend. The ETF is reasonably established with $250 million in assets, and could be worth a look for those looking to cast a wider net on the sector.
Read: Cannabis stocks stage strong rally as prospect of Democratic…
Read More: 5 high-growth themes and the stock-market ETFs that can deliver big