Exchange-traded funds (ETFs) play an important part in my investing strategy. These passive vehicles give me a quick and often low-cost way to invest in a wide range of companies.
Here, I’m going to highlight three ETFs I’d buy and hold for a decade.
The digital age
Technology is playing an increasingly crucial role in almost every area of our lives. This digitisation of the world is set to accelerate over the coming years.
I think one great way to gain exposure to this is through the iShares NASDAQ 100 UCITS ETF (LSE: CNX1). This tracks 100 tech shares listed on the Nasdaq stock exchange.
| Top 5 holdings (as of 27 March) | Portfolio weight % |
| 1. Microsoft | 12.5% |
| 2. Apple | 12.3% |
| 3. Amazon | 6.1% |
| 4. Nvidia | 5.1% |
| 5. Alphabet | 3.8% |
The index is down 20% over the last 18 months, so I’m looking to invest in it myself soon.
One risk worth noting is portfolio concentration, with a quarter of it invested in just two stocks. Were either (or both) of these to suffer a setback, then the whole ETF could underperform.
However, over a decade-long period, I’d expect many holdings to march towards much higher valuations as technology permeates almost every industry.
Prevalent themes in this ETF include cloud computing, artificial intelligence, payments, and digital advertising.
Ongoing charges are 0.33% per year.
Alternative energy
I also like the iShares Global Clean Energy ETF. This fund offers a way to invest in the global clean energy trend.
It is invested in 97 stocks and top holdings include First Solar, Enphase Energy, and offshore wind farm giant Ørsted.
Global investments into renewable energy reached a new record high of $495bn last year. It’s almost certain that figure will increase as the energy transition picks up.
One thing worth highlighting is that investor sentiment around green technology does wax and wane. That means any returns are unlikely to be consistent from one year to the next.
Still, if I had spare cash, I’d invest in this ETF. Ongoing fees are 0.65% per year.
Cat and mouse
Another ETF that I rate highly is the L&G Cyber Security ETF (LSE: ISPY). As the name suggests, this fund tracks a basket of companies active in the cybersecurity industry.
This is an area poised for major growth in the years ahead, as cybercrime is expected to cost the world around $10.5trn annually by 2025. This means cybersecurity has quickly become a necessity for all companies, organisations, and governments.
This ETF holds 43 stocks and has a 0.69% ongoing charge.
| Top 5 holdings (as of 28 February) | Portfolio weight % |
| 1. Palo Alto Networks | 5.2% |
| 2. Cloudflare | 5.1% |
| 3. Fortinet | 4.7% |
| 4. Blackberry | 4.6% |
| 5. Splunk | 4.6% |
Cybersecurity threats are constantly changing as the technologies that hackers use get ever more sophisticated. Companies need to constantly innovate to stay on top of this evolving landscape. It’s like a never-ending game of cat and mouse.
This ETF provides broad exposure to the whole industry
One risk is that the holdings can be quite volatile. For instance, Cloudflare stock went up 73% in 2021, before plummeting 65% last year.
However, this ETF has delivered an excellent 155% return since launching in 2015. And I think the future looks equally bright.
