The share market is going through a bit of a selloff phase at the moment, particularly in the tech sector.
I think it’s a great opportunity to buy some ETFs that have a lot of growth potential that are now lower than they were before.
These are two that I’ve got my eyes on:
VanEck Vectors Video Gaming and eSports ETF (ASX: ESPO)
As you’ve probably worked out, this ETF is about the video gaming and e-sports sector. It’s a pretty niche space, but it’s seeing a lot of growth and there are quite a few great companies in the ETF’s holdings.
If you’re a gamer, you’ll probably know several of the ETF’s biggest 10 holdings: Tencent, NVIDIA, Bilibili, Sea, Advanced Micro Devices, Nintendo, Activision Blizzard, Netease, Nexon and NCSoft.
You can get some really useful diversification without needing to go for the typical names like Apple, Amazon, Facebook, Google and Microsoft.
The video gaming world continues to get more popular every year, particularly thanks to COVID-19 impacts. The returns of the index that this ETF tracks has been incredible. Over the last five years the index has delivered an average return per annum of 39.2%.
There’s no guarantee that the returns will even be half as good over the next five years, but it shows the strength of the 25 businesses that currently make up the portfolio.
VanEck Vectors Video Gaming and eSports ETF is pretty cheap too, with an annual management fee cost of 0.55% per annum.
Betashares Cloud Computing ETF (ASX: CLDD)
This is a pretty new ETF that is based entirely on businesses that are heavily involved in cloud computing.
The businesses that it’s invested in are involved in the delivery of computer services, servers, storage, databases, networking, software, analytics and other services over the internet.
You may recognise some of the 36 holdings. The top 10 are: Proofpoint, Dropbox, Zscaler, Shopify, Twilio, Workday, Everbridge, Netflix, Paycom Software and Xero Limited (ASX: XRO). Other names include Salesforce, Microsoft, Amazon, Alibaba and Alphabet.
Again, the returns of index that this ETF tracks has been very good. Over the last three years the index has delivered an average return per annum of 37.9%. But who knows what the next three will be like? Probably not anywhere as strong.
There is an enormous shift to cloud computing and this trend probably has many years of growth to go.
It has a relatively high management cost, for an ETF, of 0.67% per annum. But if the net returns can outperform then the fees would be worth it.