There is increasing acceptance that electric cars will replace combustion engine vehicles in the coming years.
For those wanting to invest in this trend but feeling nervous about picking individual stocks, a new exchange-traded fund (ETF) is coming that might do the heavy lifting.
BetaShares revealed recently that BetaShares Electric Vehicles and Future Mobility ETF (ASX: DRIV) would be “coming soon”.
“Sales of electric vehicles are projected to grow strongly in coming years,” stated BetaShares.
“The transition to smarter vehicles is likely to significantly increase the use of semiconductors and high-tech componentry in cars.”
Which shares will this ETF hold?
While details, including launch date, are currently scarce, the fund manager did provide 4 examples of shares that the new ETF would hold:
- Tesla Inc (NASDAQ: TSLA): arguably the most famous electric vehicle stock, which has risen more than 1,000% since the start of 2020
- Nio Inc (NYSE: NIO): one of several Chinese car makers focusing purely on electric engines
- Aptiv PLC (NYSE: APTV): a US auto parts provider headquartered in Ireland, which has a large business making electronic active safety technologies
- Uber Technologies Inc (NYSE: UBER): best known for its dominance in ride-sharing.
All up, the Electric Vehicles and Future Mobility ETF will hold up to 50 different stocks involved in the future of transportation.
According to BetaShares, the convenience of investing in foreign businesses through ASX shares is not the only advantage of the new fund.
“DRIV offers potential portfolio diversification benefits to Australian investors, given that automotive technology is under-represented in the Australian market.”
Thematic ETFs are so hot right now
The new ASX listing is the latest in a series of thematic ETFs to come to the market this year.
Just last month, BetaShares itself listed ASX’s first cryptocurrency-related ETF, while this month ETF Securities revealed it would debut the first-ever Australian funds directly investing in Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH).
ETFs have become popular in recent years on the back of the success of passive index funds.
But Nucleus Wealth spokesperson Jayden Stent warned last month there were considerable risks with theme-based ETFs.
“You don’t want to be lulled into thinking that because some ETFs offer low volatility that all ETFs are the same,” he said on a Nucleus blog.
“The potential for large swings will mainly depend on the type of the fund… Investors [need] to take note of what the ETF is tracking and what are the underlying risks associated with it.”