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Internet ETFs Looking Great Bets Amid Omicron Uncertainty

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The ongoing pandemic and discovery of new variants are subtle reminders that the dependency on the Internet might increase with time instead of reducing. There is a lot of uncertainty surrounding the severity of the Omicron variant, which might once again bring the Internet ETFs in focus to rake in some good returns.

The pandemic has been a blessing in disguise for the e-commerce industry to date as people continue to practice social distancing and shop online for all essentials, especially food items. Thus, in sync with the digitization trend, the upcoming U.S. holiday season is expected to see a significant surge in online sales. The National Retail Federation projects online and other non-store sales increase of 11-15% to reach between $218.3 billion and $226 billion in 2021 compared with $196.7 billion registered in 2020.

Expanding digitization and the growing dependency on the Internet owing to some new normal trends like work from home, digital payments, digitization of healthcare, rising demand for video gaming among others are painting a rosy picture for the space.

The world is gradually moving toward digitization, increasing the dominance of technology in the financial sector. A Market Data Forecast (MDF) report also highlights the growing opportunities in the global financial technology market, which is expected to see a CAGR of 23.4% between 2021 and 2026. According to the report, the fintech space is expected to reach a market value of around $324 billion by 2026.

With an increased level of interest in online shopping, customers are resorting to digital payments to clear their bills. At the same time, merchants and utility providers are increasingly advocating the same. Payment services from tech titans like Google Pay, Facebook Pay, Apple Pay, Amazon Pay,  PayPal  (PYPL) and  Square Inc.’s  (SQ) Cash App are the key winners amid the increasing shift to digital payments.

Industries like cloud computing have been thriving, with most people working from home. Even though the vaccine rollout has begun globally, demand for cloud computing is set to stay robust even beyond the pandemic. In the wake of the pandemic, cloud technology adoption is projected to witness robust growth in sectors where the work-from-home initiatives are sustaining business functions.

Video-gaming lovers in the United States spent generously in October again. The industry continues to gain amid the health crisis. For 10 months, the total consumer spending on gaming is up 12% year over year to $46.67 billion (per The NPD Group data). Market experts are optimistic about the video gaming industry's strength in terms of solid sales growth despite tough year-over-year comparisons, highlighting the momentum in the space.

Internet ETFs to Gain

Against this backdrop, let’s look at some Internet ETFs that will continue to gain from increasing demand for online gaming, shopping, video streaming and work-from-home trends due to the coronavirus crisis:

First Trust Dow Jones Internet Index Fund (FDN - Free Report)

First Trust Dow Jones Internet Index seeks investment results that correspond generally to the price and yield of the Dow Jones Internet Composite Index. FDN amassed $9.76 billion in assets and charges 51 basis points (bps) in expense ratio. First Trust Dow Jones Internet Index currently has a Zacks Rank #2 (Buy) with a High-risk outlook (read: Tech Tops the Winners List of Past Decade: Best ETFs).

ARK Next Generation Internet ETF (ARKW - Free Report)

ARK Next Generation Internet ETF is an actively-managed ETF that seeks long-term capital growth by investing under normal circumstances, primarily (at least 80% of its assets) in domestic and the U.S. exchange traded foreign equity securities of companies that are relevant to ARKW’s investment theme of next-generation internet. ARKW has AUM of $4.14 billion with an expense ratio of 79 bps. ARK Next Generation Internet ETF has a Medium-risk outlook (read: ETFs in Trouble as Tesla Takes the Hit of Musk's Twitter Poll).

Invesco NASDAQ Internet ETF (PNQI - Free Report)

Invesco NASDAQ Internet ETF is based on the Nasdaq CTA Internet Index. PNQI will normally invest at least 90% of its total assets securities that comprise the index. The index is designed to track the performance of a the largest and the most liquid US-listed companies engaged in Internet-related businesses and listed on one of the major U.S. stock exchanges. Invesco NASDAQ Internet ETF amassed $911.9 million of assets and charges 60 bps as expense ratio. PNQI presently has a Zacks Rank of 2 with a High-risk outlook (read: 5 Top-Ranked ETFs to Invest in December).

O’Shares Global Internet Giants ETF (OGIG - Free Report)

O’Shares Global Internet Giants ETF is a rules-based ETF designed to provide investors with the means to invest in some of the largest global companies that derive most of their revenues from the Internet and e-commerce sectors that exhibit quality and growth potential. OGIG has AUM of $500.9 million with an expense ratio of 48 bps.

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