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Five ETFs to watch this October

  • Five ETFs to watch this October

Exchange-traded funds can be a low-cost way to access investments and this quintet would either be useful building blocks for creating a diversified SIPP portfolio or play themes, which are currently dominating the financial markets. These products are simple and easy to use, so can be a useful part of any SIPP investors toolkit.

Tom Seiber from Share's Magazine provides his top ETFs to watch for October

1. Lyxor Core MSCI World UCITS ETF (LCWL)

This exchange-traded fund tracks an index of 1,600 companies across the world for an annual charge of 0.12%. This enables you to create a diversified portfolio in a single trade, creating a useful foundation, particularly for a newcomer to investing.

This index offers access to stocks in the US, UK, Japan, France and Canada among other countries with investments in the tech, financial and healthcare sectors to name just a few. Over five years the index has delivered a return of 60%.

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2. ROBO Global Robotics and Automation ETF (ROBG)

This product offers diverse exposure to an actively-managed list of robotics experts or companies embracing robotics to improve their business.

The ETF tracks an index of 88 companies involved in robotics and automation. Forty per cent of the index consists of companies whose majority of business has to be related to robotics and automation (the ‘bellwether’ stocks); and the remaining 60% of companies with a ‘distinct portion’ of business in this area (the ‘non-bellwether’ stocks).

The index provider, ROBO Global Indices, reweights the index once a quarter so each constituent only represents a maximum 2% holding if they are bellwethers or 1% if they are non-bellwethers.

The world of robotics is broad and touches a wide range of industries from healthcare and logistics to security and manufacturing.

Stocks being tracked by the ETF include iRobot. Its robot vacuum cleaners take the stress out of housekeeping. They build maps of your home and learn the best way to clean, such as identifying spots that often have more mess than other places.

Another relevant stock is Japan’s Fanuc which makes robots for factories. It delivers labour and operational cost savings as its technology can predict breakdowns long before they can lead to downtime. 

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3. iShares Oil & Gas Exploration & Production (SPOG)

The price of Brent crude oil recently hit a four-year high and speculation has suggested that we could be on course for yet higher prices by the end of the year – some even suggest a return to $100 per barrel of oil. This reflects a growing impact on Iranian production from US sanctions and little sign OPEC plans to plug the gap despite pressure from US President Donald Trump.

This exchange-traded fund may suit someone seeking to get diversified exposure to the oil industry with a low ongoing charge of 0.55%.The ETF tracks the performance of a global basket of companies which engage in exploration and production activities. Constituents of the index being tracked include ConocoPhilips, Woodside Petroleum and EOG Resources.

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4. SPDR S&P UK Dividend Aristocrat ETF (UKDV)

This ETF provides access to the 30 highest yielding UK-quoted companies that have managed to either maintain or grow dividends for at least 10 years in a row. This screening method means you don’t get exposure to companies that have irregular dividends. The index will remove any companies that cut their dividend. Dividend growth signals the board’s confidence in the company’s long-term cash generation capabilities. You can draw the conclusion that the board sees scope for value accumulation in the business over the coming years and so you could hopefully see a rising share price plus a steady increase in dividends.

Strong share price performance can mean the yields offered by dividend growth companies aren’t the most eye-catching but, over time, they could still prove to be excellent investments. The ability to consistently grow a dividend implies a stock is cash generative and shareholder-friendly.

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5. iShares Index Linked Gilts ETF (INXG)

Debt securities like bonds and gilts (government bonds) can offer the attraction of greater security than stocks and shares alongside regular income and can be a good option as part of a balanced portfolio.

While debt securities may offer a predictable income stream, the minimum trade size for many of the bonds issued by companies can be upwards of £10,000.

Buying an exchange-traded fund (ETF) which offers exposure to a selected basket of bonds or gilts is perhaps the best route for a newcomer to this market to pursue.

The security offered by bonds makes them lower risk than shares. On the basis that risk should be proportionate to the level of return, you would expect equities to offer more significant gains.

It is worth noting that rising interest rates can cause bond prices to decline and falling interest rates can result in bond prices moving up.

A key risk to bear in mind when investing in any debt security is inflation; in an inflationary environment the fixed interest offered by bonds becomes less valuable and people rush to sell them, further depreciating their value. Inflation also tends to prompt an increase in interest rates.

This ETF helps mitigate this issue by offering exposure to bonds which track inflation.

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All exchange-traded funds can be useful for SIPP investors as they are simple way of achieving diversified exposure to financial markets. Effectively you can create a diversified portfolio in the click of  a button. Their low-cost nature is also a good fit with a pension as the costs associated with more expensive products can really add up over the life of a SIPP.

 

Selftrade does not provide investment advice. This article is the authors view and is not the view or opinion of Selftrade and Selftrade accepts no liability for any loss caused as a result of the use of this information. The opinions expressed are those of the author at the time of writing and should not be interpreted as investment advice.

The value of investments can fall as well as rise and any income from them is not guaranteed and you may get back less than you invested. Past performance is not a guide to future performance. We do not provide advice or make recommendations about investments. If you have any doubts about the suitability of an investment, you should seek advice from a suitably qualified professional adviser.

Investing within a SIPP can help boost your retirement income

  • Be in control of your retirement pot

    A SIPP gives you the flexibility and control to choose how your money is invested across a range of asset classes and sectors. Sign in at any time to invest or monitor performance.

  • Benefit from up to 45% tax relief

    The government will add 20% tax relief to contributions you make to your SIPP. Furthermore, higher and top-rate tax payers can claim up to an extra 25% back on their tax return. 

     

  • A great way to boost your retirement income

    SIPPs allow you to invest and gain tax relief on contributions up to £40,000 per annum. Thanks to the carry forward rules, any unused allowance can be rolled over for up to three years, meaning you could invest up to £120,000.

  • Take advantage of tax breaks

    Any capital gains made within a SIPP are tax free, and you can withdraw a 25% lump sum tax-free from the age of 55. That’s more money for you to spend in retirement.

     

  • Be in control of your retirement pot

    A SIPP gives you the flexibility and control to choose how your money is invested across a range of asset classes and sectors. Sign in at any time to invest or monitor performance.

  • Benefit from up to 45% tax relief

    The government will add 20% tax relief to contributions you make to your SIPP. Furthermore, higher and top-rate tax payers can claim up to an extra 25% back on their tax return. 

     

  • A great way to boost your retirement income

    SIPPs allow you to invest and gain tax relief on contributions up to £40,000 per annum. Thanks to the carry forward rules, any unused allowance can be rolled over for up to three years, meaning you could invest up to £120,000.

  • Take advantage of tax breaks

    Any capital gains made within a SIPP are tax free, and you can withdraw a 25% lump sum tax-free from the age of 55. That’s more money for you to spend in retirement.

     

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