As investors end another volatile week, market participants are reminded that 2022 will possibly bring new uncertainties to Wall Street. Meanwhile, seasoned investors mostly regard diversification as one of the most important safeguards against the short-term choppiness we’re witnessing in the stock market.
Fidelity investments defines diversification as “the practice of spreading your investments around so that your exposure to any one type of asset is limited. This practice is designed to help reduce the volatility of your portfolio over time.”
Therefore, for many retail investors, December might be a good month to revisit investment goals for 2022. Today, we introduce two exchange-traded funds (ETFs) that could appeal to a range of readers.
1. Fidelity MSCI Real Estate Index ETF
- Current Price: $32.97
- 52-Week Range: $24.30 - $33.50
- Dividend Yield: 2.77%
- Expense Ratio: 0.08% per year
All eyes have been on U.S. inflation levels lately. According to the Federal Open Market Committee, “inflation of 2% over the longer run … is most consistent with the Federal Reserve’s mandate for maximum employment and price stability.”
Today, Wall Street will pay attention to the Consumer Price Index for November. Heightened inflationary pressures could bring a rapid rate hike by the Fed, as consumer inflation has recently been about triple the rate that the Fed targets.
The Fidelity® MSCI Real Estate Index ETF (NYSE:FREL) invests in U.S. real estate stocks. This passively-managed fund began trading in February 2015. Many investors who expect inflation to keep rising have been looking at real estate investment trusts (REITs) as a potential hedge.
FREL has 167 holdings and tracks MSCI USA IMI Real Estate Index. The top 10 names make up about 40% of net assets of $2.1 billion.
Leading holdings include REITs American Tower (NYSE:AMT), which owns communications real estate; Prologis (NYSE:PLD), which offers industrial warehouse space; Crown Castle International (NYSE:CCI), which offers cell towers and fiber solutions; Equinix (NASDAQ:EQIX), which specializes in global data centers; and Public Storage (NYSE:PSA), which operates self-storage facilities.
Year-to-date, the fund returned 31.7% and hit a record high in recent days. Given inflationary pressures, the real estate sector could grow further.
Therefore, despite the recent significant run-up in price, this low-cost ETF will likely see new highs in 2022. Interested readers could regard the $31 level as a better entry point.
2. Roundhill Pro Sports Media & Apparel ETF
- Current Price: $13.44
- 52-Week Range: $13.16 - $15.38
- Expense Ratio: 0.75% per year
The Roundhill Pro Sports Media & Apparel ETF (NYSE:MVP) offers exposure to the world of professional sports. The fund started trading in March 2021, and net assets stand at about $8 million, putting it in the category of small new funds.
MVP has 38 holdings. The top 10 names make up about half of the fund.
Almost half of the companies come from the U.S. Next in line are companies from Italy (11.9%), Germany (9.1.%), Turkey (9.0%), the U.K. (6.4%) and Japan (5.3%). In terms of sub-themes, we see pro sports team (45.4%) followed by apparel and equipment (23.5%), media and other (12.9%), pro-sports leagues and arenas (10.1%), and SPACs (8.1%), which are special purpose acquisition companies.
Leading holdings on the roster include the U.K.-based professional football (soccer) club Manchester United (NYSE:MANU); Madison Square (NYSE:SQ) Garden Sports (NYSE:MSGS), whose assets include the New York Knicks basketball team and the New York Rangers hockey team; entertainment group Liberty Media (NASDAQ:LSXMA), whose segments include Sirius XM Holdings and Formula 1; Italian football (soccer) club Juventus FC (MI:JUVE); and German football (soccer) club Borussia Dortmund (DE:BVB).
Since March, MVP is down about 10%. We like the geographic and thematic diversification of the fund. Interested investors, especially those who might also be fans of certain clubs or sports franchises, should consider researching the ETF further.