ETFs are one of the best ways to invest in the stock market especially when you want a lower risk. Exchange-traded funds (ETFs) have been around for decades and have gained more popularity recently. More investors are shifting towards ETFs investing as they are versatile in nature. In this article, we will talk about why ETFs are so versatile and what are some of the best ETFs to invest in 2022.
Table of Contents
What is an ETF?
An ETF is a collection of securities from different industries or sectors. The securities are a mixture of common stocks, commodities, bonds, etc. As a result, the ETF managing company will be trading their unique Units, not the individual shares/stocks of those securities. The ETF unit will be the derivative of the underlying securities. This means the ETF unit price depends on the average value of the underlying securities. These ETF units are traded on stock exchange platforms, as a result, they are called exchange-traded funds. You can purchase ETF units during trading hours of the stock exchange just like any other securities. Also, the price of ETF units will change only during trading hours based on supply and demand.
Due to the fact that they have a basket of securities, the price drop on one security will not have a lot of effect on the overall ETF unit. Due to the diversification of the securities, they are less prone to market crashes. Which makes them perfect to invest in, especially if you are looking for long-term investments. Yes, ETFs are similar to mutual funds but their working mechanism is quite different. Mutual funds are also a pool of money but they are not traded on the stock exchange. You need to purchase the mutual funds directly from the mutual fund managing company. Also, the price of mutual funds is constant throughout the day.
One of the reasons why mutual funds are more successful than ETFs is because they have an expert team. A team that analyzes the market on the basis of which they invest their investors’ money to get profit. But in recent years, there are ETFs that are managed by an expert team. These ETFs are called actively managed ETFs which gives them an advantage over other types of ETFs.
Best ETFs to invest in 2022
ETFs are great options to trade your money in. So we have created a list of the best ETFs to invest in 2022 based on their recent performance and their expertise. Most of these ETFs will have hundreds of securities from different industries. Which makes them less vulnerable to the unexpected price change of one or two particular securities.
1. United States Natural Gas Fund LP (UNG)
UNG is one of the best performing ETFs of this year that focuses on commodities. Having $380.4 million in assets under management and performance over one year of 127.7% in growth makes it one of the best ETFs to invest in 2022. Another factor that is causing this ETF to rise is the Russia Ukraine war. This has set the natural gas at a premium price and UNG should continue to do well in the future.
2. First Trust Natural Gas ETF (FCG)
Just like UNG, FCG also focuses on commodities, especially natural gas. Having $686.9 million assets under management and performance over one year of 95.6% growth makes it worth buying. FCG is holding securities of Occidental Petroleum Corp. (OXY), DCP Midstream LP (DCP), an oil and gas exploration and production company; EQT Corp. (EQT), and more.
3. Tuttle Capital Short Innovation ETF (SARK)
SARK is known for its bet on the declining market. What makes this ETF special is that it is an actively managed ETF. The expert team of this ETF relies on the struggling market and capitalizes on the situation. It is shown roughly 70% return year to date which is quite decent. If you think that market is not good right now then you can buy some units of this ETF.
4. ipath Series B Bloomberg Nickel Subindex Total Return ETN (JJN)
JJN is a “Nickel” focused exchange-traded fund. It is traded as an exchange-traded note (ETN) which is similar to bonds but does not make interest payments. With $66.7 million in assets under management and 101.6% performance over one year, makes it one of the Nickel-focused ETFs to invest in.
5. Invesco QQQ Trust ( QQQ)
The QQQ ETFs unit is based on its underlying assets from big companies like Apple, Google, Microsoft, Tesla, and more. As this ETF has holdings from multiple sectors and industries it is less volatile to a market crash. QQQ has 102 total holdings and with $168.71 billion in assets under management, it is one of the biggest ETFs to invest in 2022.
6. Invesco S&P 500 GARP ETF (SPGP)
This ETF focuses on growth stocks and purchases them for its clients. It is designed to maintain and calculate the underlying index strictly based on its guidelines and mandated procedures. It tracks the performance of approx. 75 growth stocks in the S&P 500 index. This Invesco fund family has a Net Assets of 833.74 million which makes it perfect for long-term investments.
Exchange-Traded Funds (ETFs) give the investors diversification in their investments. This gives them a higher advantage over the traditional open-end funds. Along with that, ETFs offer lower operating costs and better tax efficiency. Investors are attracted to the ETFs because they can get a better investment portfolio and better risk management. Especially for those who do not have time for researching every stock, ETFs are the best options. As they have a basket of stocks from different industries, which makes them less vulnerable. This does not mean you do not require any research. There are ETFs that just focus on long positions or short positions or both. You can choose the perfect ETFs that suit your investment style.