Here are some ways to get exposure to the hot investment themes for 2023: infrastructure, copper, and clean energy.
Picking stocks is not everyone’s cup of tea. After all, you might decide to invest in a fantastic long-term trend, choose a stock, and then discover that stock is underperforming the others for a variety of stock-specific reasons.
It makes sense to purchase thematic exchange-traded funds (ETFs) that hold a selection of stocks because of this. The Global X Copper Miners ETF (COPX 1.68%) is available if you agree that copper is a good investment for the electrification of the economy.
Consider that you are interested in learning about clean energy and electric vehicle (EV) companies like Tesla. The First Trust Nasdaq Clean Edge Green Energy Index ETF (QCLN 3.42%) might be a good option in that situation.
Additionally, there is the iShares Global Infrastructure ETF (IGF 1.39%) if you enjoy investing in infrastructure.
Copper mining ETF
The argument for copper is supported by its long-term demand, which is fueled by economic growth (copper is the most economically sensitive industrial metal due to its use in a wide range of industries), and by its significance for the transition to clean energy.
For instance, compared to a typical vehicle, EVs require a lot more wiring. Batteries and the transmission and distribution networks required to support the expansion of renewable energy also use copper as a key component.
Furthermore, given that obtaining permits is becoming more challenging due to rising environmental and regulatory concerns, there may be supply constraints.
Although the stock Freeport-McMoRan is excellent for playing the theme of rising copper prices, if you prefer an ETF, the Global X Copper Miners ETF (which includes Freeport as a top-10 holding) will do the trick.
It offers investors global exposure to the theme while assisting in avoiding the stock-specific risk involved with investing in any one miner. Holdings in miners with headquarters in nations like Canada, the U.S., Australia, Poland, Japan, and China are included. For fans of copper, the ETF is appealing when combined with a dividend yield of close to 3%.
A clean energy ETF to purchase
The First Trust Nasdaq Clean Edge Green Energy Index ETF is alluring because it provides investors with extensive exposure to a variety of investment themes related to the clean energy transition.
For instance, its largest investments are in businesses like Rivian Automotive, ON Semiconductor, Enphase Energy, and Albemarle, which provide residential and commercial solar power storage solutions for electric vehicles.
This short list demonstrates how the ETF provides exposure to various themes and eliminates the need to select winners in a developing sector. Compared to the sector’s top-performing stocks, it is a strategy that will reduce returns. Even so, it can be challenging to locate those stocks, and there is nothing more discouraging than making an investment in a lucrative theme only to discover that the stock you own is a sector underperformer.
As a result, participants in this type of ETF will want to have exposure to clean energy without taking a significant position in any particular stock or sub-theme.
A genuinely global infrastructure ETF
Infrastructure stocks in developed markets are the focus of the iShares Global Infrastructure ETF. It holds 61% of its holdings in foreign equities and has significant investments in the utilities, energy, and transportation sectors.
The ETF invests in stocks as diverse as Spanish airport operators, Australian toll road operators, energy pipeline operators, and renewable energy companies, with a maximum holding of 6% in any one equity.
The need to play catch-up on infrastructure spending in the developed world, as evidenced by the $1.2 trillion infrastructure bill in the U.S., makes infrastructure stocks appealing in the current environment. These businesses are essential to the economy. Additionally, infrastructure development is necessary in developing nations to support economic expansion.
The Global X Copper Miners ETF’s 0.65% expense ratio and the First Trust CleanEnergy’s 0.58% expense ratio are both better than its 0.4% expense ratio. It is a great way to gain exposure to infrastructure while earning income along the way, especially when combined with the close to 2.7% dividend yield the iShares ETF offers investors.