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5 Sector ETFs That Beat the Market in 2020

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With historic twists and turns, 2020 has turned out to be a banner year. After a solid rally in February, the pandemic wreaked havoc on the economy and sent the markets into the bear territory in late March in the fastest-ever move.

Then, Wall Street made an astounding rebound with the major indices soaring to historic highs on super-easy monetary policies coupled with COVID-19 vaccine optimism. A potentially divided Congress added to the strength (read: 8 ETFs That Have Gained More Than 100% in 2020).

America has started immunizing people by giving Pfizer (PFE - Free Report) shots, developed in collaboration with the German biotechnology company BioNTech (BNTX - Free Report) . The second vaccine from Moderna (MRNA - Free Report) is also being given to Americans, starting last week. The start of vaccination has strengthened investors’ confidence in the economy, as it will end the worst-ever pandemic, leading to a faster-than-expected recovery.

Meanwhile, the Fed has pledged to hold rates near zero and will continue the asset purchase program at the current rate until “substantial further progress” has been made toward reaching maximum employment and healthy inflation. Trump had also approved a fresh $2.3 trillion COVID-19 relief and government funding package.

While there have been winners in many corners of the space, we highlight five sector ETFs that have been outperforming this year:

Invesco Solar ETF (TAN - Free Report) – Up 234.1%

This ETF has been on fire in 2020 primarily driven by President-elect Joe Biden’s push for going greener. Biden plans to pump $2 trillion into green energy over four years to build solar panels, charging stations and more; vows to rejoin the Paris climate in “exactly 77 days,” and aims for net-zero emissions by 2050. Additionally, interest in environmental, social and governance investing has been rising rapidly with firms across the globe investing in clean tech business (read: Go Greener in 2021 With Best ETFs & Stocks of 2020).

TAN offers global exposure to the solar industry by tracking the MAC Global Solar Energy Index, holding 30 stocks in the basket. U.S. firms dominate the fund’s portfolio with nearly 49% share, followed by China (23.3%) and Spain (7.2%). The product has amassed $3.7 billion in its asset base and trades in a solid volume of around 1.8 million shares a day. It charges investors 69 bps in fees per year and has a Zacks ETF Rank #2 (Buy) with a High risk outlook.

ARK Genomic Revolution Multi-Sector ETF (ARKG - Free Report) – Up 207.6%

The pandemic has led to a surge in the acceptance of the next-generation of healthcare solutions known as genomics. Additionally, rising government funding, increase in the number of genomics projects, falling sequencing costs, and the entry of new players and start-ups in the genomics field are driving the growth of the market. This actively managed ETF is focused on companies that are likely to benefit from extending and enhancing the quality of human and other life by incorporating technological and scientific developments, and advancements in genomics into their business. With AUM of $7.6 billion, the fund holds 51 stocks in its basket and has 0.75% in expense ratio. It trades in an average daily volume of 2.2 million shares (read: Top ETF of December & Its Best Stocks).

ARK Innovation ETF (ARKK - Free Report) – Up 165.8%

Innovation has been changing consumer habit and the economy. ARK defines ‘‘disruptive innovation’’ as the introduction of a technologically enabled new product or service that potentially changes the way the world works. ARKK is an actively managed fund seeking long-term capital appreciation by investing in companies that benefit from the development of new products or services, technological improvements and advancements in scientific research. In total, the fund holds 48 securities in its basket and charges 75 bps in annual fees. The product has gathered $19.1 billion in its asset base.

Amplify Online Retail ETF (IBUY - Free Report) – Up 127.7%

As more Americans prefer online shopping amid the pandemic, the online retail ETF got a boost. This ETF offers global exposure to companies that derive 70% or more revenues from online and virtual retail by tracking the EQM Online Retail Index. The fund comprises 58 stocks and has attracted $1.5 billion in its asset base. It charges 65 bps in fees per year (read: Top-Performing E-Commerce ETFs & Stocks of 2020).

WisdomTree Cloud Computing Fund (WCLD - Free Report) – Up 119.2%

The pandemic has led to an e-commerce boom and changed the consumer landscape into a purely digital one. People have chosen to stay indoors in order to avoid direct contact, which in turn has boosted demand for cloud computing, gaming, e-sports and streaming services. This ETF offers exposure to emerging and fast-growing U.S.-listed companies (including ADRs) that are primarily focused on cloud software and services, and follows the BVP Nasdaq Emerging Cloud Index. It holds 54 stocks in its basket and charges investors 45 bps in fees per year. The product has amassed $1.3 billion in its asset base and trades in an average daily volume of 472,000 shares. It has a Zacks ETF Rank #1 (Strong Buy).

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