1 No-Brainer Cloud Computing ETF to Buy Right Now for Less Than $200

In order to build wealth over time, most investors would do well to park much, if not all, of their long-term assets in the overall stock market -- perhaps via a simple, low-fee S&P 500 index fund. Such index funds offer solid long-term growth with relatively low risk. (The S&P 500 has averaged annual gains of close to 10% over long periods -- which is a rather powerful growth rate.)

But if you want to juice your returns a bit, profiting from fast-growing parts of the economy, you might seek an exchange-traded fund (ETF) that focuses on a specific sector. (An ETF is a mutual fund-like investment that trades like a stock.)

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Here's a particularly promising focused ETF: The Fidelity Cloud Computing ETF (FCLD 1.58%), which recently traded for close to $22 per share. A $200 investment would get you nine full shares, or perhaps a bit more if your broker offers fractional share investing.

Why cloud computing?

First, understand why cloud computing is worth following. It's the technology that allows us to access and use software and data that's stored "in the cloud" -- which, in reality, is a host of data centers. (You might invest in data centers, too, by the way.)

It's a rapidly growing technology niche. Per Mordor Intelligence, the market was worth an estimated $680 billion this year and is expected to grow to $1.44 trillion by 2029, only five years from now. That's an average annual gain of 16.4%.

Meet the Fidelity Cloud Computing ETF

You might seek out some companies specializing in cloud computing, and then figure out which ones will be the big winners years from now. But if you're not that much of a cloud computing expert, you might opt for a cloud-computing-focused ETF that will plunk you into a host of such companies quickly and easily.

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NYSEMKT: FCLD

Fidelity Covington Trust - Fidelity Cloud Computing ETF

Today's Change

(-1.58%) $-0.44

Current Price

$27.18

Key Data Points

Day's Range

$27.18 - $27.71

52wk Range

$20.00 - $31.93

Volume

4.9K

Here, for example, are the recent top 10 holdings -- out of about 50 -- of the Fidelity Cloud Computing ETF:

Source: Morningstar.com. Chart by author.

You'll note that some of the companies are more fully immersed in cloud operations than others. Microsoft, for example, encompasses not only cloud computing (via its Azure platform), but also the Windows operating system, Office productivity software suite, Xbox gaming platform, LinkedIn network, and much more -- and many of these incorporate cloud technology.

How has the Fidelity Cloud Computing ETF performed? There's no three-year, five-year, or 10-year average annual gain to report because the fund was only launched on Oct. 5, 2021. The fund's first full year of performance -- 2022 -- wasn't impressive, as it lost 41.1%. But the next year, it gained 52.4%.

Clearly, this fund may have a volatile life. Still, as long as the gains outstrip the losses sufficiently, it can reward shareholders well.

How might your money grow in this ETF?

Here's a little speculation -- because we can't know how the cloud computing ETF -- not to mention the S&P 500 -- will perform from year to year. Remember that over many decades, the S&P 500 has averaged annual returns close to 10%, though it might deliver somewhat more or less over your investing period. The cloud computing ETF might average 10%, too, or 30%. No one knows.

Let's imagine that it averages 15% annually. Here's how your money might grow at such growth rates if you're socking away $7,000 annually:

Calculations and table by author.

See? It's quite impressive -- though, again, not guaranteed. The best move, if you're interested in pursuing such returns, might be to devote just a portion of your portfolio to one or more market niches you're very bullish on. Then, keep up with those niches to make sure they're still growing.