Best ETFs for Q2 2022

Exchange-traded funds (ETFs) hold a collection of securities—such as stocks—that often track an underlying index. While they are similar to mutual funds in some ways, ETFs are different in that they are listed on exchanges and can be traded throughout the day like traditional stocks.

In recent years, ETFs have become immensely popular with investors for two major reasons:

  1. They provide an easy access point to a wide variety of sectors, industries, and strategies.
  2. They tend to minimize many of the risks inherent in investing in individual stocks.

Key Takeaways

  • The best exchange-traded funds (ETFs) by one-year trailing total returns have dramatically outperformed the broader market over the past year.
  • The ETFs with the best one-year trailing total returns are UNG, JJN, and FCG.
  • The top holdings of these funds are natural gas futures, nickel futures, and Occidental Petroleum Corp., respectively.

There are 1,686 ETFs that trade in the United States, excluding leveraged and inverse funds as well as those with under $50 million in assets under management (AUM). The S&P 500 has provided a total return of 12.5% over the past 12 months, as of April 5, 2022.

All three of the top-performing ETFs dramatically outperformed the S&P 500 over the past year, measured by one-year trailing total returns. Their performance has been driven by commodities, including natural gas and industrial metals, which have jumped in price due to several factors including disruptions caused by Russia’s invasion of Ukraine. The best-performing ETF, based on performance over the past year, is the United States Natural Gas Fund LP (UNG).

We examine the best three ETFs below. All numbers below are as of April 5, 2022.

  • Performance Over One-Year: 127.7%
  • Expense Ratio: 1.35%
  • Annual Dividend Yield: N/A
  • Three-Month Average Daily Volume: 8,614,388
  • Assets Under Management: $380.4 million
  • Inception Date: April 18, 2007
  • Issuer: Concierge Technologies

UNG is structured as a commodity pool, a private investment structure that pools investor contributions then trades futures and options in commodities on their behalf. UNG provides exposure to natural gas prices by holding natural gas futures contracts. The fund’s goal is to reflect the performance of daily change on the Benchmark Futures Contract, which is the futures contract on natural gas as traded on the New York Mercantile Exchange (NYMEX). It invests in futures contracts set to expire within the next month, which leaves it exposed to adverse impacts of contango. For this reason, UNG may be more appropriate for traders with a short-term strategy or as a hedge against inflation.

  • Performance Over One-Year: 101.6%
  • Expense Ratio: 0.45%
  • Annual Dividend Yield: N/A
  • Three-Month Average Daily Volume: 90.854
  • Assets Under Management: $66.7 million
  • Inception Date: Jan. 17, 2018
  • Issuer: Barclays Capital

JJN is structured as an exchange-traded note (ETN), a type of unsecured debt security that tracks an underlying index of securities and trades like a stock on a major exchange. ETNs are similar to bonds but do not make interest payments.

JJN tracks the Bloomberg Nickel Subindex Total Return, which reflects returns available through an unleveraged investment in futures contracts on nickel. Nickel is a major industrial metal with applications in many commercial and industrial areas. JJN is one of the few ETFs providing exposure to nickel, and the only one which offers exposure to futures contracts as opposed to exposure to the physical metal or through the shares of a mining firm. Like UNG above, it may be exposed to the impacts of contango.

  • Performance Over One-Year: 95.6%
  • Expense Ratio: 0.60%
  • Annual Dividend Yield: 1.58%
  • Three-Month Average Daily Volume: 2,090,443
  • Assets Under Management: $686.9 million
  • Inception Date: May 8, 2007
  • Issuer: First Trust

FCG seeks to track the ISE-Revere Natural Gas Index, which is composed of U.S. companies that generate a substantial portion of their revenues from the exploration and production of natural gas. Securities in the index must also satisfy market cap, liquidity, and weighting concentration requirements. FCG follows a blended strategy of investing in a mix of value and growth stocks across the market cap spectrum. The fund may serve as a leveraged play on natural gas, providing investors significant returns when prices of the commodity rise. But the ETF also is likely to experience volatility.

FCG’s top three holdings are Occidental Petroleum Corp. (OXY), an oil and gas exploration and production company; EQT Corp. (EQT), a hydrocarbon exploration and distribution company; and DCP Midstream LP (DCP), a midstream petroleum services company.

The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

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