Money continues to flow into exchange-traded funds (ETFs) and it's easy to see why. ETFs provide convenient and cost-effective access to a wide variety of investments, and because they're traded on exchanges, they're as simple to buy and sell as stocks.

ETFs can make it easier to invest in the industries and assets that are likely to outperform the broader market. Here are several ETFs that are particularly well positioned to deliver market-beating gains to investors in the year ahead.

Dice spelling the word ETF on top of rising stacks of gold coins

Image source: Getty Images.

The war hedge

With U.S. military forces on high alert in the Middle East due to heightened tensions with Iran, it's understandable if your investments aren't first and foremost on your mind right now. But if you are seeking a way to protect your portfolio from the risk of military conflict and the subsequent economic ramifications, one way to do so is to invest in defense stock-focused ETFs, which tend to perform well during periods of turmoil in the Middle East. 

The SPDR S&P Aerospace & Defense ETF (XAR 1.30%) gives investors access to an equal-weighted index of approximately 30 stocks in the aerospace and defense industry. Holdings include defense industry titans such as Northrop Grumman, Lockheed Martin, and Raytheon, but also smaller and faster-growing defense companies such as Kratos Defense & Security Solutions and AeroVironment. 

Importantly, XAR is not over overexposed to the biggest defense businesses. By contrast, rival defense ETF iShares U.S. Aerospace & Defense ETF (ITA 1.04%) uses a market-cap weighted approach and has a greater than 20% weighting in Boeing (BA 1.34%), the aerospace giant that has struggled mightily after multiple fatal accidents forced it to ground its 737 MAX planes. The crisis has resulted in billions of dollars of losses for Boeing, and its stock has lost a quarter of its value since early 2019. 

The poor performance of Boeing's stock -- and ITA's oversized allocation to the struggling aerospace behemoth -- is a large reason why ITA has underperformed XAR by more than 10% over the past year. Moreover, XAR has a relatively low expense ratio of 0.35%, which compares favorably to ITA's 0.42% annual fee. Thus, if you'd like to limit your risk by capping your exposure to any one particular company -- and save money in the process -- stick to XAR and its lower-fee, equal-weight portfolio strategy for your defense ETF needs.

The safe haven

Gold also tends to perform well during periods of geopolitical turmoil. The precious metal is seen as a defensive investment that can hold its value, and even appreciate, when the value of other assets, such as stocks, fall.

Gold recently hit a nearly 7-year high of more than $1,600 per ounce after a U.S. drone attack resulted in the death of a top Iranian general, and Iran responded with missile attacks on U.S. bases in Iraq. Investors concerned that these events would lead to a war between the U.S. and Iran bought gold en masse, pushing its price up in the process.

The price of gold has pulled back to approximately $1,550 per ounce in recent days, following comments by President Trump and Iranian officials suggesting that the two nations would de-escalate their military actions to avert a war. However, with recent reports that an Iranian missile may have shot down a passenger airliner, it's possible that tensions could begin to rise once again. 

Investors seeking a means to protect -- and potentially grow -- their wealth during these volatile times might wish to consider a gold ETF such as the iShares Gold Trust (IAU 0.11%). IAU is designed to track the price of gold bullion by holding gold bars in a secure vault. By taking on the challenges and expenses of storing and securing gold, IAU gives investors a convenient and relatively low-cost way to profit from an upward move in gold prices.

Like the SPDR S&P Aerospace & Defense ETF, iShares Gold Trust is a bargain compared to its main rival, SPDR Gold Trust (GLD 0.09%). IAU's carries an expense ratio of only 0.25%, compared to 0.40% for GLD. And although GLD is the largest gold ETF with assets of approximately $44 billion, IAU is also quite large, with assets of about $18 billion. Thus, investors will sacrifice little in the way of liquidity with IAU, while benefiting from significant cost savings. As such, if you're interested in adding a gold ETF to your diversified investment portfolio, iShares Gold Trust is your best option.