ETFs To Stay Away From (And Why) - InvestingChannel

ETFs To Stay Away From (And Why)

Proprietary Data Insights

Top Sector-Specific ETF Searches This Month

#1SPDR S&P Biotech ETF417
#2Energy Select Sector SPDR Fund333
#3VanEck Vectors Gold Miners ETF186
#4iShares PHLX Semiconductor ETF168
#5U.S. Global Jets ETF162

A Primer On How To Spot ETFs You Should Avoid

As we continue our series on ETFs (go here for the most recent one and links to the entire series), The Juice looks more closely at ETFs that organize around a sector or theme. 

It’s important to spot and understand the difference. 

To help illustrate the difference, let’s start with an ETF that could very well be worth your time – the U.S. Global Jets ETF (JETS)

You Know Exactly What You’re Getting With JETS

First good sign. This ETF does not track the performance of the New York Jets. Rather, it gives you exposure to the global airline industry by attempting to mirror the movement of the U.S. Global Jets Index (JETSX). 

Whether you’re bullish or bearish the global airline industry is up to you. But if you are bullish, it might make sense to go long JETS. 

Because it’s super-focused. And, within that focus, nicely diversified. 

However, to achieve this diversification management follows a pretty strict playbook. Because, remember, it’s mimicking an established index.

If you look at the holdings of JETS and the stocks that compose JETSX, they’re pretty much the same in name and position size. 

Source: U.S. Global ETFs

There you have the top five holdings in the JETS ETF. 

Here you have the top five names in the JETSX index. 

Source: U.S. Global Indices


It’s when terms are broad and poorly defined. When fund managers have too much subjective leeway over what to own. Over which companies actually fit their ETF’s theme. Or when the theme itself makes for a murky and unclear, if not downright bad investment opportunity. 

This is when you can run into problems, as The Juice will show, if you’d be kind enough to scroll with us.

Brought to you by Weiss Ratings

3 Immediate Threats to Your Wealth

Three terrifying forces are converging to threaten your wealth. Force #1: The destruction of decent INTEREST you earn on your savings. Force #2: The rapid erosion of your PRINCIPAL through inflation and Force #3: The gut punch to your PORTFOLIO in the crashing stock market. I’ve prepared solutions to all these problems and more in my 7-step plan for 2022.

Click here for my 7-step plan for 2022

ETF Investing

ETFs To Stay Away From

Key Takeaways:

  • Some ETFs get too lofty. Others too specific, yet simultaneously vague.
  • ARKK and YALL highlight what we mean and illustrate why you should stay away from these types of ETFs. 
  • It’s almost always better to go with straightforward and simple ETFs. 

Whereas JETS provides specific, though diversified exposure to a focused section of the stock market, other ETFs don’t just lack focus, they fall into the category of ETFs you probably should avoid. 

For example, last week The Juice briefly mentioned Cathie Wood’s ARK Innovation ETF (ARKK) in our installment on making investing simple with ETFs:

The fund focuses on tech stocks with the potential for “disruptive innovation”, which means companies with products and services with the potential to “change the way the world works.”   

That’s some lofty stuff! ARK’s performance: not so lofty. It’s down more than 60% over the last year.

In this case, not only does the manager have to stock pick, but they do so somewhat arbitrarily. They have to define something that’s incredibly subjective. 

A quick look at how ARK describes itself tells you everything you need to know:

Source: ARK Funds

That’s all over the place. And ARKK’s horrible performance reflects this lack of focus. 

It’s not to say you can never buy a fund where you put faith in a manager’s stock picks. Sometimes you can win. However, it adds another layer to your decision-making process. 

When you see a manager stock picking around a poorly-defined theme, consider this a reason to hesitate. You have to have considerable faith in the person, not just conviction in whatever broad idea they’re floating. 

Y’all Come Back Now, Ya Hear!

Same probably applies to an ETF that has sent papers to the SEC. 

They want the ticker YALL. They want to be called the All-American ETF. And here’s how they detail how they’ll pick stocks: 

The Sub-Adviser then screens out companies that, in the Sub-Adviser’s assessment, have emphasized political activism and social agendas at the expense of maximizing shareholder returns in the Sub-Adviser’s assessment. For example, the Sub-Adviser will generally exclude companies that make public statements about a then-current political hot button item unrelated to their business (e.g., companies that issue press releases in response to U.S. Supreme Court rulings).

A side of politics with your investing? Probably not a good idea. 

The Bottom Line: Today’s installment ultimately comes back to a basic theme – keep it simple. 

If you were going to pick your first two ETFs ever today, it probably makes sense to go as straightforward as possible with products that track established, broad stock market indices. So the SPDR S&P 500 ETF Trust (SPY) or Invesco QQQ Trust (QQQ)

From there, you take it into sectors you want to own, via ETFs that methodically adhere to the names in, again, established indices. This might mean JETS or something else entirely. It’s just that when you’re taking the risk of going sector-specific, you don’t need to add the quality of your fund manager’s stock picking skills to your list of concerns. 

Any four of the names ahead of JETS on today’s Trackstar list of ETFs investors search for most make more sense than going rogue on an unfocused fund. That is, of course, if you like the sectors they run in.

Want to get content like this directly to your inbox? Then we urge you to sign up for our newsletter here

Related posts

Advisors in Focus- January 6, 2021

Gavin Maguire

Advisors in Focus- February 15, 2021

Gavin Maguire

Advisors in Focus- February 22, 2021

Gavin Maguire

Advisors in Focus- February 28, 2021

Gavin Maguire

Advisors in Focus- March 18, 2021

Gavin Maguire

Advisors in Focus- March 21, 2021

Gavin Maguire