The COVID-19 pandemic and the government measures put in place to halt its spread have wrought havoc on economies across the world. Travel restrictions have wiped billions off the tourism sector, consumer confidence has nosedived, and Australia is entering its first recession in some 30 years. None of which is much cause for optimism.
However, pandemics pass and economies eventually recover. And futurists might already be looking ahead to see which industries will lead the world out of this pandemic. Picking individual companies is difficult and risky – particularly in the current climate. However, exchange-traded funds (ETFs) offer an alternative investment option.
Buying ETFs basically means you buy shares in a basket of companies. This gives your portfolio broader exposure to the market than you would otherwise be able to achieve on your own – and hence reduces your risk. But the targeted nature of many modern ETFs also gives you the chance to still be selective about which ASX trends you want to participate in.
Here are three options for targeted ETFs that could tap into growing areas of the economy post-COVID-19.
Betashares Australian Sustainability Leaders ETF (ASX:FAIR)
This Betashares ETF tracks an index of companies that meet various ethical and sustainability standards. These standards are primarily based around exposures to the mining or fossil fuel industries, but also extend to activities that involve animal cruelty or gambling. It also preferences companies that are market leaders in adopting sustainable business practices.
The index excludes Australia’s big four banks, and is heavily weighted towards healthcare. Its largest holdings are in companies like Fisher & Paykel Healthcare Corporation Ltd (ASX:FPH) and CSL Limited (ASX:CSL). But it also includes companies in the communications services and technology space.
Climate-conscious investors were already becoming more discerning about where they invested their money prior to the COVID-19 pandemic. This crisis may only advance that trend.
ETFS ROBO Global Robotics and Automation ETF (ASX:ROBO)
With a real eye to the future, this ETF aims to track an index of up to 200 companies that are global leaders in robotics, automation and artificial intelligence. While it is heavily weighted towards the industrials and IT sectors, it invests across multiple industries, including healthcare. Currently, its largest holding is in US-based computer game company NVIDIA Corporation (NASDAQ:NVDA).
AI and robotics are rapidly evolving ASX trends that could shape the future. This is particularly in a post-COVID-19 world where companies seek to drive efficiencies through automation and more business is conducted digitally. This ETF could give you exposure to the exciting companies that are pushing the boundaries of this technology.
ETFS S&P Biotech (ASX:CURE)
The last ETF on my list provides exposure to the US biotech sector. Biotech is a niche part of the healthcare industry that focuses on the research and development of treatments and vaccines based on genetic engineering.
The index includes companies like Novavax, Inc. (NASDAQ:NVAX) that are in the race to develop a COVID-19 vaccine. However, all these companies develop cutting-edge treatments that will have applications well beyond our current pandemic.
Barriers to entry for this part of the healthcare sector are incredibly high – new companies are required to invest heavily in research and development just to gain a foothold. This means that once a company is established, it can grow its market share and profits rapidly.
Rhys Brock has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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