Desert-island ETF picks for 2022

by Ann deBruyn

The “Best desert-island ETF” category, which was introduced in 2019, is always a fun one, as it allows our panellists to let loose a bit and choose ETFs that don’t fit in anywhere else. It’s here you’ll find more thematic funds and other types of products. These aren’t core holdings—look to our other categories for those kinds of stalwart securities—but they could complement the other funds in your portfolio, as long as they jibe with your investment objectives, risk tolerance level and time horizon.

Our panellists’ best desert-island ETF picks:

Yves Rebetez: Global X Internet of Things ETF (SNSR)

The Internet of Things (IoT) is still in its infancy, but it has enormous potential to change how we live. IoT refers to the Internet-connected and wireless devices that collect data in factories, help self-driving cars navigate roads, allow people to have automated “smart homes” and more. “There is high growth potential from IoT,” says Rebetez. Global X says that the global share of 5G mobile connections could hit 47% by 2026, up from 4% in 2020, “unlocking vast potential for the IoT, thanks to increased bandwidth and download speeds.”

Dale Roberts: Purpose Bitcoin ETF (BTCC.B)

For another year, Roberts has picked Purpose’s bitcoin offering, which was the first-ever bitcoin ETF. The fund turned one year old in February 2021, and while it is down 30% since inception, Roberts is still a bitcoin believer. “I am a big fan of bitcoin exposure in the portfolio,” he says. “I treat it as another portfolio asset. To me it is modern gold. It is insurance against a basket of fiat currencies—also known as ‘melting ice cubes.’”

Mark Seed: Horizons Growth TRI ETF Portfolio (HGRO)

HGRO, which has 99% weighting to equities, was designed to provide long-term capital growth by investing primarily in Horizons Total Return Index ETFs. Seed likes it because it’s a simple all-in-one ETF that’s both low-cost—it has a 0.16% MER—and tax-efficient. “If I was stuck on a desert island and I had to pick just one low-cost fund to own for long-term growth, this would be it,” he says.

Cameron Passmore: DFA Dimensional US Small Cap Value ETF (DFSV)

Passmore likes Dimensional Fund Advisors’ products because they’re designed based on academic asset-pricing literature and take five compensated risks into account, he says. That includes market, company size, relative price, profitability and investment risks. DFA increases the weights of its securities that have exposure to these risks, which “results in a more reliable expected return,” says Passmore. “DFSV is a small-cap value ETF that delivers deep exposure to multiple risk factors.”

Ben Felix: Avantis International Small Cap Value ETF (AVDV)

A returning pick, this ETF holds a broad collection of small-cap companies from developed nations outside of the U.S. Felix likes small-cap value stocks because “they have higher expected returns than the market.” He adds: “This is true both theoretically and empirically. The theoretical basis for the higher expected returns of small-cap value stocks is that they are riskier, so allocating them does not make sense for everyone.”

Mark Yamada: Invesco NASDAQ NextGen 100 Index ETF (QQQJ)

This is a new pick, though it’s similar to HXQ, which Yamada chose last year. Many investors are familiar with QQQ, Invesco’s NASDAQ-tracking ETF. But what if you want to own even growthier names? Yamada suggests holding this fund, which tracks the 101st to 200th next-largest companies on the NASDAQ, most of which are mid-cap names. “This is a relatively new index of companies with better growth and valuation characteristics than the ‘grown-up’ NASDAQ-100,” he says.

Watch: ETF Academy Lesson 9

Robb Engen: Vanguard All-Equity ETF Portfolio Fund (VEQT)

“VEQT is literally my own desert-island pick,” says Engen, who invests in this fund himself across all of his various accounts. While it is also on our all-in-one list, he’s putting his own money into this ETF because, with more than 13,000 global stocks, “it’s a simple, sensible, globally diversified and low-cost solution you can ignore for decades and be happy with the long-term outcome.”

Ioulia Tretiakova: BMO Low Volatility Canadian Equity ETF (ZLB)

Again this year, Tretiakova has chosen ZLB for her desert-island pick. “Volatility is persistent; forecasting and managing volatility is a fruitful exercise—unlike forecasting returns—and it improves capital preservation during turbulent markets,” she says, explaining why she chose this ETF. “Mathematically this would translate into slightly higher returns in the long run, assuming that management fees and higher rebalancing costs don’t wipe out the advantage.” ZLB’s MER is high (0.39%) but, she says, in a high-volatility environment, “it might be justified by the downside protection that it provides.”

Desert-island ETF picks for 2022

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This article was originally published in 2012 and is updated annually (most recently on May 25, 2022).