Exchange-Traded Funds, or ETFs, offer investors so many different advantages that it’s no wonder they have become such a big part of most people’s portfolios over the past few decades. These financial instruments are a strong alternative to mutual funds thanks to their lower fees and can offer a simple and straightforward way to diversify your holdings. Since ETFs trade like a stock, you can easily make adjustments to your long-term holdings and always have a good idea about how they are performing given their intra-day price visibility.
One of the intriguing things to note about ETFs is that there are so many of them to choose from. You can even add ETFs in certain sectors that are showing strength, which can be a very lucrative approach to trading and investing. If you are interested in this strategy, keep reading below to discover 3 sector ETFs to buy now.
1. VanEck Vectors Semiconductor ETF
If you are interested in the red hot semiconductor industry, which is expected to benefit from widespread chip shortages and strong demand for the foreseeable future, VanEck Vectors Semiconductor ETF (NYSE:SMH) is a great option. Semiconductors are used to power some of the most widely-used devices and technology that we have today, including mobile phones, cars, data centers, computers, and more. Instead of trying to select individual names out of a sector that is chalked full of innovative and unique companies, this ETF allows you to gain exposure to all of them.
VanEck Vectors Semiconductor ETF includes cutting-edge companies like NVIDIA (NASDAQ:NVDA), Lam Research (NASDAQ:LRCX), Applied Materials (NASDAQ:AMAT), Taiwan Semiconductor Manufacturing (NYSE:TSM), Texas Instruments (NASDAQ:TXN), Micron Technology (NASDAQ:MU), and Advanced Micro Devices (NASDAQ:AMD). If you are bullish on semis at this time and want to take advantage of tailwinds like 5G and cloud computing, you can’t go wrong with this sector ETF, which has rallied over 15% year-to-date.
2. Vanguard Materials ETF
The materials sector is interesting right now for several reasons. First, you have the prospects of a global economic recovery that will rely heavily on companies that provide basic materials such as steel and copper. Infrastructure spending is also on the rise, given president Joe Biden’s $2 trillion plan to improve things like roads, bridges, pipes, and electric grids. Finally, the fact that commodity prices are expected to skyrocket over the next few years due to heavy demand and possible inflation makes the materials sector one of the most interesting areas of the market at this time.
The VVanguard Materials Index Fund ETF(NYSE:VAW) is a nice way for investors to gain exposure to shares of companies that extract or process raw materials. Think about how important materials like aluminum, steel, copper, gold, fertilizers & agricultural chemicals, and industrial gases will be as the world bounces back from the pandemic. It’s hard to imagine a more bullish scenario for these types of stocks, and the company’s top holdings such as Linde (NYSE:LIN) , Freeport-McMoran (NYSE:FCX), Dow (NYSE:DOW), Newmont (NYSE:NEM)., and Air Products and Chemicals (NYSE:APD) have all be strong performers in 2021.
3. Consumer Staples Select Sector SPDR
While consumer staples might not be the most exciting sector to consider adding to your portfolio, there’s something to be said about its defensive qualities and reliable earnings. Since many of these companies provide non-cyclical products, which see steady demand regardless of what is going on in the economy, investors can count on steady and consistent growth and low volatility. Perhaps that is why this sector performed so well during the recent selloff in high momentum growth stocks.
The Global Consumer Staples ETF (NYSE:KXI) rallied over 8% in March and might be a smart place to park some capital over the next few months if you anticipate more volatility given that the market is at all-time highs. This ETF contains strong consumer staples companies like Procter & Gamble (NYSE:PG), Coca-Cola (NYSE:KO), PepsiCo (NASDAQ:PEP), and Walmart (NYSE:WMT), which are the types of businesses that have a place in any balanced portfolio. The Consumer Staples Select Sector SPDR Fund also pays a dividend yield of 2.55%, which means it is a nice way to generate extra cash flows in your investment account.