Exchange-traded funds (ETFs) can be a great way for investors to tap into particular themes or markets. They add diversification and some of them can generate excellent returns.
Here are three very different ETFs that I think are worth assessing for a Stocks and Shares ISA.
Property income
The iShares MSCI Target UK Real Estate ETF (LSE:UKRE) offers diversified property exposure without owning physical real estate. Over half of the fund is in real estate investment trusts (REITs) and property companies, with the rest in UK inflation-linked gilts (government bonds whose payments rise with inflation). Bonds helps smooth out volatility and balance risk.
REITs held here include Segro, Land Securities, and LondonMetric Property. The latter has a £7.4bn portfolio across sectors like logistics (warehouse tenants include Tesco, Primark, and Next) and entertainment and leisure (Alton Towers and Travelodge).
Of course, a UK recession is a risk. A downturn would add challenges for the retail and hospitality sectors, while souring investor sentiment for UK property and shares. It’s worth noting that the ETF has underperformed since interest rates rose sharply in 2022.
On balance though, I think now is a good time to consider investing for the long term. The ETF is offering a bumper 7% dividend yield!
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Robotics growth
Turning to growth with the iShares Automation & Robotics ETF (LSE:RBTX). This fund is invested in 138 stocks related to the development of automatic and robotic technology.
Unlike the one above, the ETF has had a better run — up 50% in three years.
Top holdings include chipmakers Nvidia and Advanced Micro Devices, which are suppling the computing power behind AI and robotics.
On the industrial side, giants like ABB and Siemens are world leaders in factory automation. Software players like Autodesk and Snowflake are also in the top 10 holdings.
Now, this tech bias does leave the fund open to underperformance if the sector fell out of favour. Some of the top holdings are highly valued, so this adds some valuation risk.
Over the long run, however, I’m very bullish on the robotics theme, particularly self-driving cars.
The ChatGPT moment for general robotics is just around the corner.
Nvidia CEO Jensen Huang
Investing in Europe
Finally, I think the iShares Core EURO STOXX 50 ETF (LSE:EUE) is one to examine. This tracks 50 of the largest firms across the eurozone, including German software giant SAP, Banco Santander, and French luxury conglomerate LVMH (Moët Hennessy Louis Vuitton).
Also in the top 10 holdings are two very special European businesses. The first is plane maker Airbus, whose backlog is enormous thanks to surging demand for fuel-efficient jets like the A320neo family. It has been taking market share from crisis-hit US rival Boeing.
Meanwhile, ASML is the only company in the world supplying extreme ultraviolet (EUV) lithography machines. These allow chipmakers like Taiwan Semiconductor Manufacturing and Samsung to make the most advanced semiconductors.
Without ASML’s machines, there would be no iPhone processors or AI revolution.
That said, were ASML or SAP to sell off aggressively, the ETF could suffer because this high-quality pair account for over 13% of the portfolio. So there’s a degree of concentration risk.
But given the high quality of the stocks, I expect this ETF to do well over time. There’s also a handy near-3% dividend yield on offer.
