2 Megatrend ETFs for Singapore Investors to Buy Now

Megatrend ETFs

Tim Phillips

January 17, 2023

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In Singapore, when we think of the stock market, many of us think of buying shares of individual companies.

However, investing in Exchange-Traded Funds (ETFs) should also be a part of any long-term investor’s portfolio strategy.

That’s because ETFs offer all of us many benefits. Whether we’re experienced investors or just starting out, everyone should have some exposure to ETFs.

With that said, there are more and more ETFs coming to the market that are tapping into structural megatrends.

These are typically trends that have staying power and can play out over years, if not decades.

So, in terms of investing, having some exposure to companies operating in these segments makes sense over the long term.

With that, here are two ETFs that tap into megatrends and which any Singapore investor can consider buying today.

1. Global X Robotics & Artificial Intelligence ETF

We all know the power that automation is playing in today’s economy. Combine that with the rapid rise of artificial intelligence and you can invest in the combo via the Global X Robotics & Artificial Intelligence ETF (NYSE: BOTZ).

The Robotics & AI ETF gives investors exposure to a range of companies involved in the adoption of robotics and AI.

Many of these companies are not widely-known but are playing a huge role in the automation of crucial tasks.

The ETF’s largest holding – Intuitive Surgical Inc (NASDAQ: ISRG) – is a healthcare-focused firm that manufactures and operates its da Vinci Surgical System.

This is a robotic surgical system that helps doctors perform minimally invasive surgery.

Other companies that are among the ETF’s largest holdings include Japanese manufacturing robotics and automation firms Fanuc Corp (TYO: 6954) and Keyence Corp (TYO: 6861).

So, at least with regards to Japan, the ETF gives investors exposure to companies that can be relatively hard for the average investor to buy individually.

All this, though, comes at a cost in terms of the ETF’s expense ratio – which is relatively high at 0.68%.

US companies make up around 43% of the ETF’s value while Japanese companies make up another 36% or so.

Given the sell-off in growth stocks, it’s no surprise to see that the ETF’s price is down by 28% over the past year.

However, for long-term investors that believe in the power of robotics and AI, this could be a suitable megatrend ETF to buy.

2. iShares Global Clean Energy ETF

The biggest megatrend of all may very well be renewable energy and this is what you invest in when you buy the iShares Global Clean Energy ETF (NYSE: ICLN).

Coming from the reputable “iShares” ETF brand of BlackRock Inc (NYSE: BLK), this clean energy ETF holds 98 companies globally that are involved in the clean energy sector.

The ETF’s largest holding is Danish firm Vestas Wind Systems A/S (CPH: VWS), which is actually the world’s largest manufacturer of wind turbines.

Many of the ETF’s holdings are also utility companies, which are starting to generate more of their power from clean, or renewable, sources like wind, solar, and hydroelectric.

Given the size of the ETF, at over US$5 billion, the expense ratio is understandably lower than other thematic ETFs – coming in at 0.40%.

In terms of the ETF’s geographic exposure, the majority is again in the US (39.3%), followed by Denmark (11.4%), China (11.4%) and Spain (8.3%).

The iShares clean energy ETF has held up better over the past year given the utility-like nature of many of the businesses within it; the ETF’s share price is up 12.2% over the past 12 months.

It also pays out a dividend twice a year, although its dividend yield is relatively low at 0.9%.

Focus on multi-decade trends

While stock markets are down hard over the past year, it’s worth looking past the short-term volatility and focusing on potential long-term winners.

If you don’t feel like trying to “pick” winners, then just being in the right sector or megatrend – via a suitable ETF – can be rewarding over time.

In that sense, both robotics & AI, as well as clean energy, offer long-term investors an opportunity to benefit from trends that will play out over the coming decades.

 

Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips doesn’t own shares in any companies mentioned.

About the Author: Tim Phillips

Tim Phillips
Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth. He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer. In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.