By Matt McCallSep 03, 2020
It’s not a secret. ETFs are typically not my thing.
Don’t get me wrong. ETFs – or exchange-traded funds – can be decent investments for some people. They’re typically cheap to own, and you can get exposure to everything from the biggest indexes to the smallest niche sectors
When you buy most ETFs, you end up owning anywhere from 30 to 100 companies. The good news is that’s a lot of companies, and you get instant diversification.
The bad news is that’s a lot of companies, and you end up owning a lot of average and even crappy businesses.
You get the bad with the good… which dilutes your returns.
You can do better if you get more of the good and less or even none of the bad. That’s the whole idea behind building your own ETF. I call it the “basket” approach to investing, or a concentrated portfolio.
This approach has allowed my subscribers to rake in massive returns without taking on massive risk. Rather than buying 30-50 companies, we zero in on a handful of the best businesses with the biggest upside potential in a hypergrowth trend.
And here’s a little tip for you – ETFs can be a good place to find potential stocks to buy.
Let me show you what I mean using one of the top-performing ETFs this year…
The ARK Genomic Revolution ETF (ARKG) has had one heck of a year.
It broke out to all-time highs last week on a day when the broad market was about flat. It’s up more than 70% so far this year and at its peak had rallied 168% from its March low.
That’s incredible for any asset, and it’s even given some of our stocks a run for their money.
There are many reasons why the genomics ETF is outperforming right now.
First and foremost, genomics are critical to the future of healthcare. And as we discussed here in MoneyWire yesterday, I expect the next decade will bring advancements that we can only imagine in our wildest dreams. Smart investors are getting in position now.
When an ETF is doing well, there must be some good stocks in it. I recommend starting with the top 10 holdings, which you can find on most quote pages online or on the ETF’s website.
That’s what I did with the genomics ETF, and sure enough my subscribers have exposure to several of its largest holdings…
The ARK Genomic Revolution ETF’s top 10 holdings make up nearly 55% of the entire fund, and it’s top two – Invitae (NVTA) and CRISPR Therapeutics (CRSP) – are stocks that my Early Stage Investor subscribers have held for a few years now.
Invitae is one of the fastest-growing genetic testing companies, and it went on a strong 30% run in recent weeks. It’s up nearly 140% for my subscribers since January 2019. CRISPR Therapeutics is one of the Big Three gene editing businesses, and it’s also up about 140% over the same timeframe.
I also have exposure to three more of the genomics ETF’s top holdings through personal investments and my private investing firm, Penn Financial Group… and of the remaining five, four are on my watch list.
That’s incredible. It honestly amazes me.
I expect to find a golden nugget or two in many ETFs, but it’s not often that my vigorous vetting process – which includes deep-dive analysis and boots-on-the-ground research, among other things – lines up so well with an ETF.
But I like to give credit where credit is due.
The ARK Genomic Revolution ETF is an exception. It’s partly because the genomics industry is extremely hot right now. It’s one I’ve followed closely for years, and I’m thrilled with the performance we’ve seen recently. It’s only the beginning of what lays ahead over the long term.
The genomics ETF is a good example of how a sector fund can spark investment ideas for you to research on your own. They’re a great place to start, especially when you want to gain exposure to a specific hypergrowth trend.
I’m a “top down” investor. I look for industries poised for 10X… 20X… even 100X hypergrowth. Then I drill further down into these industries and find stocks that will deliver the largest gains to early shareholders.
Some really early stage trends don’t have ETFs built in them yet. That’s okay. Just another reason to build your own. And it also means we’re getting in before the herd – when the real money is made.
Now don’t get me wrong. This still requires a lot of work. But this is the kind of work I love. It’s not just my job – I spend my nights, weekends, and even holidays researching new stocks ideas!
If you’re uncomfortable researching and picking stocks, ETFs could be a good fit. But if you want to generate the kind of wealth that could change your life forever… you want to invest in the best companies changing the way we live.
And if those are the kinds of stocks you want to be invested in today, click here to gain access to my research now.
Click here to listen to Matt McCall’s MoneyLine podcast! This week, Matt talks about how to uncover the next stock ready to soar. It’s something every investor wants to know… and it’s not as uncommon as you’d think. Recently, a stock in Matt’s Early Stage Investor portfolio shot up more than 170%! He explains how this happened, and he also talks about how to invest for the long term, raking in high-percentage gains by investing patiently.
You can subscribe to this podcast on iTunes, Stitcher, Spotify, or wherever you listen to podcasts.
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