ETF investing is a safe, easy way to profit from a booming industry, without the risk of buying into a specific stock.
That's why we've compiled the list of the three best ETFs to own for 2015.
These ETFs give investors exposure to three of today's most profitable industries on the market:
- One ETF deals with a $575 billion global problem.
- Another is in the midst of a $166 billion M&A spree.
- The third "best ETF" plays the market's highest-performing index and invests in some of the world's most innovative companies.
Take a look at the three best ETFs to own today ...
Best ETFs to Own for 2015, No. 1: HACK
The first ETF we recommend is the PureFunds ISE Cyber Security ETF (NYSE Arca: HACK). It's an ETF that invests in cybersecurity, one of the fastest-growing industries on the market.
Last year, more than $95 billion was spent on cyber defense. That total is expected to hit $155.74 billion by 2019, according to research firm MarketsandMarkets. That's a 63% growth rate.
IBM Corp. (NYSE: IBM) claims its client companies are attacked 16,856 times per year on average.
Each year, cybercrime costs the global economy more than $575 billion, annually.
The biggest names in the industry have also been some of the biggest winners. FireEye Inc. (Nasdaq: FEYE), one of the most recognizable names in the industry, is up 68.6% in 2015. The Dow is up just 0.5% in the same time.
But these stocks can also be very volatile. Last July, FEYE stock fell nearly 18% in the first week of the month.
That's why we recommend the HACK ETF. It holds some of the biggest names in cybersecurity like Cyberark Software Ltd. (Nasdaq: CYBR), Qualys Inc. (Nasdaq: QLYS), and Infoblox Inc. (NYSE: BLOX). Those three stocks alone are up 81%, 19%, and 34% in 2015, respectively.
"One of the things I really like about HACK is its industry-specific diversity," Money Morning Small-Cap Investing Specialist Sid Riggs said. "HACK is most heavily invested in the systems software industry, which will prove to be a great stabilizing force for the fund. That's the sphere of the IT sector that's been growing most reliably since 2010, with the consulting firm Gartner Inc. already forecasting enterprise software to grow by 7.3% in 2015."
HACK is up 24.4% in 2015. It has more than $990 million in assets and has an expense ratio of 0.75%.
Continue reading for two more of the best ETFs to own for 2015.
Best ETFs to Own for 2015, No. 2: FBT
We're also targeting the pharmaceutical and biotech industries with our ETF investing strategy in 2015. Our top pick is the First Trust NYSE Arca Biotech ETF Fund (NYSE: FBT).
You see, drug spending has increased across the board.
According to the IMS Institute of Health, global cancer spending topped $100 billion for the first time in 2014. That was 10% higher than it had been in 2013.
Almost every specialty drug will see a hike in spending in both 2015 and 2016 as well, says Express Scripts. Hepatitis C treatments will lead the way, with growth of 208% in 2015 and 205% in 2016.
Spending on inflammatory conditions is expected to grow more than 21% each year. Multiple sclerosis spending will jump by 11% each year. Respiratory conditions will see sales growth of 131% and 103%.
There has also been a massive M&A boom in these industries. According to PricewaterhouseCoopers, the "life sciences" field had 35 M&A deals in Q1 2015. The life sciences industry is made up of pharmaceuticals, medical devices, biotech, diagnostics, and contract-research organizations.
Those deals totaled $166.3 billion. That's more money than was spent during all of 2014, which saw M&A activity total $150.1 billion. In Q1 2014, just $46.5 billion was spent.
FBT has gained 18.5% in 2015, compared to just 0.5% for the Dow Jones.
"The stocks in the First Trust fund have a median market cap of about $8.4 billion," Money Morning Defense & Tech Specialist Michael A. Robinson said when he first recommended it. "That's large enough to offer stability but small enough to deliver plenty of upside."
Regeneron Pharmaceuticals Inc. (Nasdaq: REGN), Celgene Corp. (Nasdaq: CELG), and Gilead Sciences Inc. (Nasdaq: GILD) are three of FBT's biggest holdings. Those three are up 63%, 38%, and 47% in the last 12 months.
FBT has 30 holdings that are all roughly equal in size, near 5%.
Best ETFs to Own for 2015, No. 3: ONEQ
The third in our series of best ETFs to own for 2015 is the Fidelity Nasdaq Composite Index Tracking Stock (Nasdaq: ONEQ).
The Nasdaq Composite has had an impressive run in 2015. On March 2, the Nasdaq topped the 5,000 mark for the first time in 15 years. The index closed at a record high of 5,107 on May 27.
Year to date, the Nasdaq is up 6.8%. ONEQ has climbed 7.2% in the same time.
The Nasdaq's rise this year, widely outpacing the two other key benchmarks, is also much healthier than its climb during the dot-com bubble. Companies leading the Nasdaq today have solid earnings. Plus, many pay regular dividends.
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Some of ONEQ's biggest holdings include Apple Inc. (Nasdaq: AAPL), Microsoft Corp. (Nasdaq: MSFT), and Google Inc. (Nasdaq: GOOG, GOOGL). AAPL is the biggest winner of the group, up 40% in the last year.
But the ETF doesn't just invest in large-cap firms. Starbucks Corp. (Nasdaq: SBUX), biotech giant Gilead Sciences Inc. (Nasdaq: GILD), and financial services leader T. Rowe Price Group Inc. (TROW) are also holdings.
"This is a great foundational type of investment," Robinson said in September 2014. "You can use it to build around. You can use it to be the recipient of regular contributions and to achieve some of those long-term 'life goals' like house down payments, college funds, and retirement. The shrewdest investors will look at this as an investment they'll want to own for a long, long time - if not forever."
ONEQ has $573 million in assets and has climbed 17.3% in the last 12 months.
Follow me on Twitter @KyleAndersonMM.
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