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Burned by the Stock Market? Consider These 4 ETFs Instead

By Sam Swenson, CFA, CPA - Mar 20, 2021 at 5:35AM

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Acting on the temptation to invest in volatile stocks may leave you wishing you hadn't.

It can feel rational to invest your extra cash in the latest hot stock, and that's the dangerous part: Just because it feels right doesn't make it the best use of your funds. This is not to say you can't spend your money however you want. But it is worth considering the concentrated risks associated with every investment you choose.

If, for example, you bought Tesla at its recent high of nearly $900 per share, you might have been disappointed to see it lose about a third of its value in just a few weeks. If you were to buy exchange-traded funds (ETFs), on the other hand, you'd be able to spread risk across many companies, leaving you with exposure to leading industries without the aggressive volatility. 

Here, we'll browse four of the more interesting ETFs and their basic investment theses. 

1. Israel Innovative Technology ETF

ARK Investment Management -- Cathie Wood's firm -- offers a unique opportunity to invest in one of the world's most innovative countries with the Israel Innovative Technology ETF (IZRL 2.67%). The fund focuses on Israeli companies at the forefront of medicine, technology, digital advertising and logistics. It's no coincidence that Israel has come out of the pandemic with flying colors: About 90% of its population over age 50 has already been vaccinated, and about half of its population has received at least one vaccine. In short, this ETF is a convenient way to access Israel's innovative capacity.

2. SPDR S&P Kensho Final Frontiers ETF

It's been about a month since NASA's Perseverance landed on Mars, and while it may be some time before humanity creates a livable colony on the red planet, the push toward space exploration is very much alive. One way to explore this sector is through the SPDR Final Frontiers ETF (ROKT 1.25%). As our technological capabilities increase along with our collective thirst to know the unknown, there will be continued investment in space and deep sea exploration. Without shouldering the risk associated with any one company, you'll find that this tidy ETF provides investment in some of the top players in the space, including Maxar Technologies, Virgin Galactic Holdings, and Raytheon

Astronaut floating in space.

Image source: Getty Images.

3. Siren Nasdaq NexGen Economy ETF

As Bitcoin continues its meteoric rise, it's critical to remember that we're still in the early innings of the "next-generation" economy -- much less the "post-pandemic" economy. Many large institutions have made big bets on the future of digital currency, and with those big bets will come growth in underlying industries, such as those that focus on blockchain technology. The Siren Nasdaq NexGen Economy ETF (BLCN 2.25%) isn't cheap with an expense ratio of 0.68%, but it does provide convenient access to companies devoting significant amounts of capital to blockchain-related infrastructure. It's difficult to know exactly what the future holds, but it does appear that we're going to be with blockchain technology long into the future. 

4. Vanguard Total Stock Market Index ETF

The reason this ETF has found its way onto this list is that it should probably be on every list. You don't need to feel that you have to pick the right sectors at the right time to be successful with investing. With the Vanguard Total Stock Market Index ETF (VTI 2.05%), you get to own all sectors at minuscule cost. The fund is heavily diversified across market capitalization, industry exposure, and valuation, but perhaps most importantly, it removes the time-consuming work of deciding how and where to invest your money. Simply buy, hold, and invest at regular intervals for dependable results over the long term. 

ETFs can be preferable

Most of us know someone -- or saw someone on the internet -- who made some outlandish return by investing in a single stock. While that makes for a compelling story, it doesn't speak to the majority of short-term traders who get burned by the stock market

ETFs can offer a viable alternative: By investing in many companies through one fund, you're able to spread out risk and access upside potential at the same time. While this is by no means a mandate to swear off single-stock investing forever, it might serve as a reminder that investing is inherently risky. The rug can be pulled out from under you at any time.

ETFs do provide a veil of protection through diversification -- and that is exciting in its own right. 

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Stocks Mentioned

Reality Shares ETF Trust - Reality Shares Nasdaq NexGen Economy ETF Stock Quote
Reality Shares ETF Trust - Reality Shares Nasdaq NexGen Economy ETF
$29.49 (2.25%) $0.65
Tesla, Inc. Stock Quote
Tesla, Inc.
$707.73 (7.43%) $48.93
Raytheon Technologies Corporation Stock Quote
Raytheon Technologies Corporation
$95.00 (1.54%) $1.44
Vanguard Index Funds - Vanguard Total Stock Market ETF Stock Quote
Vanguard Index Funds - Vanguard Total Stock Market ETF
$202.93 (2.05%) $4.07
Maxar Technologies Stock Quote
Maxar Technologies
$29.79 (3.22%) $0.93
Virgin Galactic Holdings, Inc. Stock Quote
Virgin Galactic Holdings, Inc.
$6.68 (3.25%) $0.21
SPDR Series Trust - SPDR S&P Kensho Final Frontiers ETF Stock Quote
SPDR Series Trust - SPDR S&P Kensho Final Frontiers ETF
$37.69 (1.25%) $0.47
Bitcoin Stock Quote
$28,966.86 (-2.59%) $-769.03
ARK ETF Trust - ARK Israel Innovative Technology ETF Stock Quote
ARK ETF Trust - ARK Israel Innovative Technology ETF
$19.21 (2.67%) $0.50

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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