Investing in an exchange-traded fund (ETF) doesn't have to mean that you're investing in the entire market or that you have exposure to hundreds of stocks. ETFs have evolved over the years, and can be focused on industries, and even small subsets of certain markets. Some ETFs, for instance, can focus on memes or the latest trends, while others might specifically target dividend stocks.
Four of the best-performing ETFs this year are iShares U.S. Healthcare ETF (IYH 0.16%), Vanguard High Dividend Yield Index Fund (VYM 0.25%), United States Oil Fund (USO 2.18%)and Tuttle Capital Short Innovation ETF (SARK -1.88%) Here's an overview of what they focus on and whether they're still good investments right now.
1. iShares U.S. Healthcare
The iShares U.S. Healthcare ETF has fallen 10% this year, which isn't great, but it's still better than the S&P 500's decline of 20% over the same period. A key reason the fund has been doing relatively well is because of its focus is on the healthcare industry, which is a relatively safe place to invest these days amid inflation and fears of an impending recession.
Many of the fund's stocks are not just growing but also paying dividends, including its top two holdings -- UnitedHealth Group and Johnson & Johnson. Investors have been flocking to safer stocks amid a downturn in the markets, and the U.S. Healthcare ETF holds many of those type of safe investments. That's also why the fund remains a solid investment today, and one that can continue to outperform the markets in the second half of the year.
2. Vanguard High Dividend Yield
Investors would have earned a similar return with the Vanguard High Dividend Yield ETF, as it too is down about 9% -- but that's without factoring in dividends. If you include them, then Vanguard's yield goes up a couple of percentage points (as does the S&P 500's). Either way, it's been a market-beating investment thus far for similar reasons to the iShares U.S. Healthcare fund.
Healthcare is a key sector that this dividend-focused fund targets, but at 14% of the ETF's total weight, it ranks second behind financials (which account for 20%). Johnson & Johnson, a Dividend King, is the fund's top holding. Other big-name dividend stocks in the ETF include ExxonMobil and JPMorgan Chase. This is further evidence that investors have been gravitating more toward value and dividend-paying stocks. Like the earlier healthcare-focused fund, this remains a great option for investors today.
3. United States Oil Fund
At one point this year, the United States Oil fund was up more than 60%. The fund invests in crude oil futures contracts, so it's going to largely follow the path of oil prices. And with oil prices falling over the past month, it's not surprising to see this ETF has started to give back some of its gains.
Ultimately, whether this ETF is a good buy will depend on your outlook for oil prices. The war in Ukraine and general travel demand will weigh heavily on which direction crude goes. Given that oil prices are still relatively high compared with where they were a few years ago, I'd be hesitant to invest in the fund. And in the longer term, it's more likely that oil prices will decline as the Organization of the Petroleum Exporting Countries increases production and more supply hits the market.
4. Tuttle Capital Short Innovation
ETFs can give investors a way to bet against, or short, certain industries and trends. The Tuttle Capital Short Innovation fund goes a bit further and specifically bets against Cathie Wood's Ark Innovation ETF, which has been struggling mightily this year. The goal of the Short Innovation ETF is to produce a return that's the inverse of the ARK ETF each day. Thus far it's done an excellent job of that, with its returns of 55% this year being nearly the exact opposite of the ARK's 54% decline.
The ARK ETF is home to many top growth stocks, including Zoom Video Communications, Tesla, and other popular investments. While these investments haven't done well of late, I wouldn't expect them to continue underperforming over the long haul, which is why the Short Innovation ETF doesn't look like a great place to invest right now.