Top 7 Strangest ETFs
If it often seems as if there’s an Exchange Traded Fund (ETF) for nearly any market, industry or commodity on the planet that’s because there is. Pick an industry, a geographic location, a financial market or commodity of any type and chances are it has at least one ETF all its own. This gives investors the ability to focus their capital on just about any market niche conceivable, and that’s a nice investment tool to have by any measure. But ETF Mania is going to the extreme. The slice-and-dice pattern of the investment industry in creating funds that most closely approximate real world economic activity is coming dangerously close to being…well--weird!
Just because you and I and everyone else we know could never conceive of a potential need for some funds, they’re still out there and more are springing up all the time. Consider the following sample of some of the strangest ETFs around.
HealthShares Enabling Technologies ETF (HHV).
This fund specializes in sector funds of sector funds. It invests in very specific slices of the healthcare field and includes such sub-sectors as HealthShares CardioDevices ETF (HHE), HealthShares Diagnostistics ETF (HHD), and HealthShares Emerging Cancer ETF (HHJ).
Market Vectors Gaming ETF (BJK).
This ETF invests in the stock of major gambling companies around the world. Not only is it a very specific play on the gambling industry, but on the theory that people will gamble even during the worst of economic times.
Ibbotson Alternative Completion (PTO).
An ETF of ETFs—literally. The specific mix of ETFs included in the fund changes as do the allocations so there’s no way to project what the the fund will contain at any given point in time. So if you want an EFT that plays on ETFs, this is your fund!
Global X Lithium (LIT).
This fund invests in both lithium mining companies and lithium battery manufacturers. This may be one of the best investment plays available on electric cars, and the future potential of a fund like this is obvious.
iPath Global Carbon (GRN).
This fund is in a class by itself as far as strange goes. It isn’t even a play on any type of investment, but on European Union Allowances and Certified Emission Reduction Credits. This is purely a political play, and it’s subject to all the complications, re-interpretations and delays that affect just about any idea that’s hatched by political bodies.
iPath Dow Jones-UBS Livestock Subindex Total Return (COW).
The symbol alone cries out for investigation! Though the word “livestock” appears in the fund name, its investment is limited to beef and pork. This could be mostly a play on inflation since meat prices tend to be among the most affected commodities during periods of increasing prices.
Internet HOLDRS (HHH).
This fund definitely qualifies as strange because it represents a play on a very small number of very select and even unrelated stocks. It’s different from the others in that it’s been around a good while (since 1998) and it’s actually quite widely traded. The fund is actually a trust but is generally considered to be an ETF. It doesn’t track an index and because it only contains a very small number of stocks it’s high on the risk calculator
In case you like strange investments…
Just the fact that these ETFs exist means there’s a market out there for them somewhere, and maybe you want to be a part of it. If so, just keep in mind that any funds that are so specifically tied to a single limited market segment are also extremely high risk. In fact, most of the funds on this list have performed very badly this year, and I don’t think it’s a stretch to say that they probably will do so most years. These ETFs, and others like them represent raw speculations. You buy them because you expect a unique combination of circumstances to benefit the holdings in the fund. If you do buy in, be sure you’ve done your research and are fully aware of the risks as well as the potential rewards. Be sure also that your investments are a small enough percentage of your overall portfolio that total loss wouldn’t jeopardize your future investment plans. But even with all caveats aside, any investment that’s as unique as some of these are could be fun. Just make sure that you’re using play money to invest in them!
Photo by Zdenko Zivkovic via Flickr