Although we have about another six weeks left in 2015, it’s never too early to start thinking about what is on the horizon for next year.
Today, I want to present to you the best exchange-traded fund (ETF) ideas for 2016 if your primary goal is growth investing. Next week, we’ll cover the best ETF ideas for income investors. For today, let’s stick to the growth side of things.
First, let me say that I think 2016 will be a relatively tough equity market, with U.S. stocks likely to move modestly higher in the low-to-mid single-digit-percentage gains. We do have the fact that this is an election year in our favor, as election years do tend to be good for the equity markets historically.
One of the factors we need to watch closely next year that will determine how markets perform is the price action in commodities such as oil and copper. Another key will be the performance of emerging markets and China. If these areas stabilize, that will do a lot to prop up markets worldwide. Then there’s the Fed and the fate of interest rates, which going into 2016 likely will continue to occupy all of our minds.
Given the conditions as we approach 2016, I think next year will be all about looking for the best sector ideas going forward — both for growth investing and for income investing.
Here’s my personal list of five growth ETF ideas for 2016. Some of these we currently own in the Successful ETF Investing newsletter, and some are just on our radar. All, I suspect, will offer investors good opportunities to profit in the year to come.
1) Health Care Select Sector SPDR Fund (XLV). Healthcare is an industry that continues to benefit from demographics, innovation, mergers and acquisitions (M&A) deals and insurance mandates. XLV is the ETF that holds the biggest and best health care stocks around.
2) First Trust Dorsey Wright Focus 5 ETF (FV). This is a “fund of funds” that simultaneously holds other funds that have allocations to top-performing sectors. Biotech, Internet, consumer staples, consumer discretionary and healthcare all are part of this fund.
3) PureFunds ISE Cyber Security ETF (HACK). This is a cybersecurity stock ETF that we’ve written about extensively in this publication and in the Successful ETF Investing newsletter. We also recently conducted a FREE webinar on HACK, which I encourage you to check out before you start making investment decisions in 2016.
4) iShares India 50 ETF (INDY). India is a country that has a pro-capitalist political climate, a huge amount of human capital and citizens hungry for economic growth and an enhanced living standard. INDY is a way to get exposure to the companies benefitting most from these trends.
5) WisdomTree Japan Hedged Equity Fund (DXJ). Japan continues to put the pedal to the metal on “Abenomics,” which means more quantitative easing from the Bank of Japan and likely more upside for Japanese stocks. And, with DXJ’s hedge component, you get that performance without the negative influence of any currency disparities.
When it comes to growth in 2016, these are the funds I think represent great ideas going forward. If you want more ideas, including which funds we’re buying right now, then I invite you to check out my Successful ETF Investing newsletter today!
“Success consists of going from failure to failure without loss of enthusiasm.”
— Winston Churchill
He was arguably the greatest statesman of the 20th century, and observing the geopolitical events of the 21st century, it would be nice if we had a presence like Winston Churchill leading the charge against global threats. Unfortunately, Churchillian leadership skills are sorely lacking in today’s political landscape.
Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Ask Doug.
In case you missed it, I encourage you to read my e-letter column from last week about several ETFs that can be used as signposts for the broader market. I also invite you to comment in the space provided below my commentary.