So far, 2021 has been kind to investors, with significant market indices finishing the year in the green zone. The S&P 500 and Dow Jones Industrial Averages have risen roughly 27% and 10%, respectively.
From the beginning of the year to 6 months, the Nasdaq Composite surged 22%, whereas the Russell 2000 went up about 14%.
Due to soaring inflation, fatal variations spawning new waves of the COVID-19 epidemic, and supply-chain bottlenecks resulting from pandemic-related restrictions, markets remained unpredictable in 2021.
The Federal Reserve’s continued assistance, on the other hand, aided the economy’s recovery from the pandemic-induced downturn. The Omicron variant fears have died, and a new conflict between Russia and Ukraine has risen out of the blue.
According to etf.com, investors will rotate to some of the more than 200 thematic ETFs offered by more than a dozen asset managers, which cover a wide range of long-term trends like blockchain, cannabis, cleantech, healthcare innovation, mobile payments, and resource scarcity.
By 2022, thematic ETFs, which are actively managed, will account for 10% of equities net inflows.
There are a few sectors to watch out for in 2022 if an investor wants to invest in ETFs.
Consumers have been fighting growing inflation and COVID-19 variation worries for a long time. Consumers are optimistic about the quick circulation of the coronavirus vaccine and the recovery of the U.S. economy from pandemic-related slumps.
The retail sector was bustling with potential because of high levels of consumer expenditure and rising employment conditions. Thus, the retail industry is sure to boom, and therefore the retail ETFs.
Given the strong trends, investors may consider investing in the retail ETFs below to take advantage of the sales surge. SPDR S&P Retail ETF XRT, Amplify Online Retail ETF IBUY, VanEck Retail ETF (RTH), and ProShares Online Retail ETF (ONLN).
Another key sector is the Energy sector. Investors are keeping a careful eye on the energy sector, which is showing signs of revival as world consumption and growth of the economy return to pre-pandemic levels.
Introducing a coronavirus vaccination is slowing the global spread of the coronavirus outbreak. cyclical industries are looking up thanks to the opening of world economies and rising demand.
Invesco Dynamic Energy Exploration & Production ETF PXE, Vanguard Energy ETF VDE, Fidelity MSCI Energy Index ETF (FENY), The Energy Select Sector SPDR Fund (XLE), and iShares U.S. Energy ETF are some of the options available to investors (IYE).
The semiconductor industry has been attracting investors’ attention for a long time due to its promising future. WFH and internet-based learning trends fueled demand for processors among Computer manufacturers and data-center operators, thanks to the coronavirus.
Huge public cloud providers are investing in Hybrid cloud because of its growing importance among businesses. This development will most likely benefit data-center chip manufacturers.
Investors should evaluate the iShares Semiconductor ETF SOXX, VanEck Semiconductor ETF SMH, First Trust Nasdaq Semiconductor ETF (FTXL), Invesco Dynamic Semiconductors ETF (PSI), and SPDR S&P Semiconductor ETF (XSD) in light of current market conditions.
Bank ETFs are another set of thematic ETFs that should be considered. The Federal Reserve’s decision to reduce its monthly bond purchases could help expand the market.
The move to tighter monetary policy will raise yields, which will benefit the financial sector – because higher interest rates will assist banking institutions, insurance firms, discount brokerage houses, and asset managers in making more money.
The yield curve (the differential between long- and short-interest rates) might become narrow, which will help banks’ net interest margins. As a result, the steeper slope of the yield curve and a minor increase in loan demand are expected to boost the net interest margin, accounting for a significant portion of bank profits.
Invesco KBW Bank ETF KBWB, SPDR S&P Regional Banking ETF KRE, iShares U.S. Regional Banks ETF (IAT), and SPDR S&P Bank ETF (KBE) are some ETFs to be looked out for.
In 2022, the renewable energy sector has the potential to continue to grow. Government regulations that promote renewable energy, significant renewable investment, lowering total costs of generating renewable electricity, and increased usage of electric vehicles (E.V.) may all contribute to space’s momentum in 2022.
iShares Global Clean Energy ETF, Invesco Solar ETF, First Trust NASDAQ Clean Edge Green Energy ETF, ALPS Clean Energy ETF, and Invesco Global Clean Energy ETF are some of the ETFs to be examined.
These sectors should be kept in mind while investing in ETFs.
FAQ
Is ETF a good investment?
ETFs are generally considered low-risk investments. They are low-cost and offer diversification because they hold a basket of stocks or other securities.
Which is safer ETFs or stocks?
Since ETFs are diversified, which means they hold a basket of stocks or other securities, they carry less risk compared to stocks. But ETFs can be bought and traded like stocks.
Should beginners invest in ETFs?
ETFs are easily traded on the stock market, and they invest in stocks and different other assets. One thing to remember is that most of the ETFs are passively managed. It is wise to talk to saving experts before investing in ETFs for beginners.
Is it risky to buy ETF?
Most investors today choose ETFs to tap into the underlying advantage of diversification that comes with it. Some investors also choose ETFs to access certain asset classes or investment patterns.
For instance, investors who want to preserve their capital will try to invest in bond ETFs, and investors who want exposure to blockchain will invest in blockchain-exposed ETFs.
As a result, investors must understand what an ETF owns and how it came to own the securities in its portfolio.
Since ETFs are diversified, which means they hold a basket of stocks or other securities, they carry less risk compared to stocks.
