For Wall Street and investors, this has been a buckle-up-and-hold-on sort of year. The coronavirus disease 2019 (COVID-19) pandemic was responsible for the fastest bear-market retracement in history during the first quarter, and also gave way to the strongest quarterly rally since 1998 during the second quarter. It's been exceptionally volatile, and short-term traders have likely taken their fair share of lumps.
But the thing about volatility is that it begets opportunity for patient investors. That's because every single stock market correction and bear market in history has eventually been put into the rearview mirror by a bull-market rally.
The thing is, you don't always need to pick out individual stocks to come out a winner. For those of you who either don't have the time to commit to individual stock research, or who fear the risks of buying into individual stocks, may I suggest considering an exchange-traded fund (ETF)?
An ETF is a security that usually holds a basket of stocks or assets with a specific focus. For example, investors can buy into businesses that are focused solely on growth, or perhaps buy into specific industries, trends, or companies within a specified market cap range. Investor choice with ETFs is seemingly limitless.
But not all ETFs are created equally. Some are operating in red-hot industries that are ripe for investors' money. If you have, say, $2,500 that won't be needed to pay bills or to cover emergencies, then you have more than enough to buy into the following three top-notch ETFs right now.
First Trust Nasdaq Cybersecurity ETF
The first ETF I'd strongly suggest investors consider buying is the First Trust Nasdaq Cybersecurity ETF (CIBR 1.32%).
The allure of cybersecurity stocks is simple to understand. No matter how well or poorly the U.S. economy is performing, hackers and robots attempting to illegally access company information don't take time off. This means in-house network and remote cloud protection have become a basic-need service. And with the coronavirus pandemic pushing workers into a remote environment, cloud protection has taken on even more importance.
Though growth estimates will vary, Grand View Research estimates that the global cybersecurity market will grow by 10% annually between 2020 and 2027, ultimately reaching $326.4 billion. In other words, cybersecurity is a double-digit growth opportunity with high margins and relatively predictable cash flow given that it's a basic-need service.
Though an annual net expense ratio of 0.6% might be unappetizing to some ETF investors, don't let it scare you. The ETFs roughly 1.4% yield will more than cover First Trust Nasdaq Cybersecurity's annual management expenses, and you'll be gaining instant access to some of the fastest-growing and most innovative cybersecurity companies on the planet.
For example, identity security company Okta (OKTA -0.32%) is currently First Trust Nasdaq Cybersecurity's fourth-largest holding (5.89% of invested assets, as of August 7, 2020). Okta has a suite of identity protection solutions that allow enterprises to add on new products as they grow. This is a big reason behind Okta's 20%-plus annual growth rate.
Now imagine an ETF packed with high-growth, artificial intelligence-focused security companies like Okta, and mature moneymakers like Cisco Systems. That's the First Trust Nasdaq Cybersecurity ETF for you!
VanEck Vectors Junior Gold Miners ETF
Another one of the best ETFs $2,500 can buy right now is the VanEck Vectors Junior Gold Miners ETF (GDXJ 4.45%).
Despite a volatile year for equities, gold has been marching higher almost uninterrupted since the year began. Looking back decades, I can't recall ever seeing more catalysts at the sails of the physical yellow metal. That's great news for gold-mining stocks.
Since physical gold offers no yield (i.e., pays no dividend), plummeting global bond yields have made it more attractive than ever for investors to choose gold as their preferred store of wealth. Also, as the money supply rapidly grows from the Fed's quantitative easing activity, the U.S. dollar has come under immense pressure. Since the dollar and gold have an inverse relationship, this is a formula for record strength in gold.
But make no mistake about it -- you don't want to own physical gold. Rather, you want the leverage and potential dividends associated with mining stocks. Junior gold miners (and junior silver miners, which are also included in this ETF) are expected to see the biggest surge in operating cash margins over the next couple of years. When coupled with improved operating efficiency and production, we could see small-cap and mid-tier gold and silver producers skyrocket in value.
I'm particularly a fan of Yamana Gold (AUY 3.86%), which is the VanEck Vectors Junior Gold Miners' sixth-largest holding by percentage of assets. Yamana Gold has seen modest growth in its flagship Canadian Malartic mine, brought new production online (Cerro Moro), and anticipates double-digit gold equivalent ounce (GEO) production growth in 2021 to north of 1 million GEO. To boot, Yamana has also erased more than $900 million in net debt from its balance sheet over the past five years.
The VanEck Vectors Junior Gold Miners ETF is a lustrous add for your portfolio.
ProShares Pet Care ETF
Finally, I'm big on paw-tential, which is why I believe the ProShares Pet Care ETF (PAWZ 1.62%) is one of the best focused baskets of stocks you can buy right now.
There are few growth trends in this world that I'd call virtually fool-proof, but spending on companion animals is one of them. According to statistics from the American Pet Products Association, spending on companion pets hasn't declined on a year-over-year basis in at least a quarter of a century. This year alone, an estimated $99 billion will be spent by Americans on their pets.
Additionally, surveys have shown that nearly all pet-owning households consider their pet to be part of the family. That means big spending potential for the 84.9 million households estimated to own a pet today.
The ProShares Pet Care ETF takes advantage of all of these major growth trends in the pet-care space. You'll have exposure to companion pet-focused pharmaceuticals, organic foods, companion pet insurance, and veterinary diagnostic devices, to name a few focuses.
One of my favorite companies in the ProShares Pet Care ETF is insurer Trupanion (TRUP -2.57%), which ascended to the heavens last week after reporting its second-quarter operating results. During the COVID-19-impacted quarter, Trupanion grew its total enrolled pets by 29% from the prior-year period, with subscription enrollments up 15%. The best part about companion pet insurance is that Trupanion has only penetrated between 1% and 2% of the North American market, so there's a massive runway of growth still to come.
The ProShares Pet Care ETF is a steady growth ETF long-term investors can buy right "meow."