ETFs for mega trends (DALL·E)

One of the key decisions when I first started seriously investing over twenty years ago was what was a mega trend I could capitalise on. For me it was urbanisation, people moving to the cities. This required all sorts of personal products such as banking, retail and telcos as families became quickly richer (even if only relatively).

Commodities also played into that as China spent a ton of money building cities for urbanisation.

Back then, investing into mega trends meant buying individual stocks adding risks, but these days we can do it with ETFs. Much easier and even local ETFs give global exposure.

With this in mind I was thinking recently about other emerging mega trends. The continued growth of China and rise of India and Asia are obvious ones (and there are ETFs for that), but I wanted to be more niche than that.

 A warning. Some themed ETFs are not as great as others. Read why here.

How to invest in mega trends?

We have a number of local JSE listed ETFs that cover some of the main mega trends. They of course trade in rands on the local exchange, but as the underlying stocks are global you will benefit from currency moves.

Importantly, all the ETFs listed below can be included into your tax-free account.

A last warning, these trend will not be quick nor smooth sailing. Expect volatility and periods when things don’t look so great for your preferred mega trend. Further likely little or no dividends, as these trends emerge into mature businesses.

ETFs for mega trends

Healthcare

Technology is driving improved healthcare and as a result we’re living longer and needing even more healthcare. This is the easiest trend to spot and one that will only continue. But I do have a concern: Regulation. Healthcare costs the world over have been increasing well ahead of inflation, and governments will at some point start to tackle those concerns. Will they succeed? Do voters even care? I think definitely yes to the later, but technology could also work to drive prices lower. And of course,  new game-changing drugs are hard to resist for governments.

• Satrix Healthcare Innovation Feeder (JSE code: STXHLT) ~ TER 0.60%
• Sygnia Itrix Solactive Healthcare 150 (JSE code: SYGH) ~ TER 0.52%

Building the future

Not only in rebuilding ageing infrastructure such as crumbling bridges around the world. But new ways of thinking of cities and how we live. Consider the movement of 15-minute cities where everything you need is within 15-miniutes. Furthermore, think of the advancements 5G (and following Gs) will bring, coupled with automatous driving and the internet of things. The cities of the future may finally be those I saw in magazines as a kid in the 70s.

• Satrix Global Infrastructure (JSE code: STXIFR) ~ TER 0.77%
• Satrix Smart City Infrastructure (JSE code: STXCTY) ~ TER 0.60%

A better earth

Here we have the environmental, social and governance (ESG) trend. Many in the markets hate on the term and even the idea. But how does one argue against good sustainable businesses, especially if that can be proven to improve profitability?

The bigger problem is that this trend is in the early days, and so defining ESG metrics and measuring accordingly is not always simple. But there are a fair number of ETFs available and some cover global or emerging markets, adding a thin layer on top of already established themes.

• Satrix Inclusion & Diversity (JSE code: STXID) ~ TER 0.49%
• Satrix MSCI Emerging Markets ESG Enhanced (JSE code: STXEME) ~ TER 0.39%
• Satrix MSCI World ESG Enhanced (JSE code: STXESG) ~ TER 0.634%
• Sygnia Itrix S&P Global 1200 ESG (JSE code: SYGESG) ~ TER 0.38%
• Sygnia Itrix Sustainable Economy (JSE code: SYGSE) ~ TER na
• 1nvest MSCI World SRI Index Feeder (JSE code: ETFSRI) ~ TER 0.41%

Technology

Lastly of course is technology. The cutting edge right now in this space is AI, but no local ETFs covering that, yet. Instead we get relatively broad tech ETFs, starting with the Nasdaq, tech companies within the S&P500, and of course the Sygnia 4th Industrial Revolution.

• Sygnia Itrix 4th Industrial Revolution Global Equity (JSE code: SYG4IR) ~ TER 0.61%
• Satrix Nasdaq 100 (JSE code: STXNDQ) ~ TER 0.48%
• 1nvest S&P 500 Info Tech (JSE code: ETF5IT) ~ TER 0.35%

What’s missing?

Truthfully, lots. Space exploration and AI are two obvious. But we’re only focusing on JSE listed, we’ll look at global in a later article.

Simon Brown

At Just One Lap, we are big fans of passive investment using ETFs. In this weekly blog, we discuss ETFs on the local market and the factors you need to consider when choosing an ETF. If you have wondered how one ETF differs from another, this is where you can find out. We explain which index each ETF tracks, what type of portfolio could benefit from holding each ETF, and how the costs will affect your bottom line.