Summary

The article outlines eight ETFs that delivered exceptional returns in 2020, with a focus on ARK Invest's innovation ETFs and ETFs related to clean energy and technology.

Abstract

In 2020, several ETFs significantly outperformed the major stock indices, with ARK Invest's suite of innovation ETFs leading the pack, all achieving over 100% annual returns. These ETFs, which include sectors such as autonomous technology, robotics, fintech, and genomics, have substantial holdings in companies like Tesla and Square. Additionally, the Global X Lithium & Battery Tech ETF (LIT) and clean energy ETFs like ICLN and TAN also saw remarkable growth, fueled by global shifts towards sustainable energy solutions. The author emphasizes the diversification benefits, professional management, and dividend payments as key advantages of investing in ETFs over individual stocks, and shares personal experience of diversifying their investment portfolio with these ETFs.

Opinions

The author expresses regret for panic selling at the beginning of the 2020 market downturn but also highlights the learning experience that led to a successful investment year with a 50% return.
ARK Invest's ETFs are praised for their impressive performance, with particular attention to their largest holding, Tesla, which surged by 740% in 2020.
The author suggests that the overlap in holdings among ARK Invest's ETFs is beneficial as it allows for exposure to a variety of growth sectors.
There is an optimistic view on the future growth of clean energy ETFs, supported by global initiatives and business developments in the sector.
The author advocates for the inclusion of ETFs in investment portfolios due to their diversification benefits, active management, and potential for dividend reinvestment through DRIP.
The author reveals a personal investment strategy that includes positions in the mentioned ETFs as well as individual stocks, indicating a preference for a balanced investment approach.

Eight ETFs with Staggering Returns in 2020

If only I put my money in these at the beginning of last year…

Photo by Nattanan Kanchanaprat on Pixabay

To say that the stock market performed surprisingly well in 2020 would be an understatement. For the major indices, this translated to the Dow rising by 7.3%, the S&P 16.3%, and the Nasdaq an impressive 43.6% to finish out the year.

Simply put, if you had just put your money in some index funds at the beginning of the year and left your account until the end of the year, you would have been well rewarded for not panic selling during the crash from February to April. Unfortunately, I was one of those panic sellers. That initial loss drove me to learn as much as I could to be profitable in the stock market. Thanks to the bull market that ensued and many, many trades later, I was able to close out the year with a 50% annual return.

But enough about me. You came to learn about the ETFs that would have had you beating the major indices. Here they are in order of annual percentage return during 2020.

ARK Invest ETFs

Founded in 2014, ARK Invest offers five “actively managed innovation ETFs” and boasts $17 billion in managed assets. For example, ARKK’s biggest holding at 10.95% (at time of writing) is Tesla. With shares valued at $729.77, this amounts to a nearly two billion dollar position. It also helps that Tesla surged 740% this year.

All five of ARK’s actively managed innovation ETFs have managed over 100% annual returns this year.

ARKQ: ARK Autonomous Technology & Robotics ETF

Annual percentage return in 2020: 107.49%
Dividend: 0.44% annually
01/04/21 trading price: $76.84
Top holdings: Tesla, Materialise NV, Trimble, John Deere, JD.com, Alphabet, Kratos Defense & Security, Baidu, Flir Systems, Iridium Communications

ARKF: ARK Fintech Innovation ETF

Annual percentage return in 2020: 107.64%
Dividend: 0.29% annually
01/04/21 trading price: $49.30
Top holdings: Square, Mercadolibre, Zillow, Intercontinental Exchange, Tencent Holdings, Pinterest, Paypal, Adyen, Sea Limited, Alibaba Group

ARKK: ARK Innovation ETF

Annual percentage return in 2020: 157.73%
Dividend: 0.07% annually
Current trading price: $124.69
Top holdings: Tesla, Roku, CRISPR Therapeutics, Square, Teladoc Health, Invitae, Zillow Group, Pure Storage, Editas Medicine, Proto Labs

ARKW: ARK Next Generation Internet ETF

Annual percentage return in 2020: 159.12%
Dividend: 0.08% annually
01/04/21 trading price: $145.77
Top holdings: Tesla, Roku, Square, Grayscale Bitcoin Trust, Teladoc Health, Spotify, Pure Storage, Tencent Holdings, Facebook, Netflix

ARKG: ARK Genomic Revolution ETF

Annual percentage return in 2020: 185.53%
Dividend: 0.10% annually
01/04/21 trading price: $93.14
Top holdings: Pacific Biosciences of California, Teladoc Health, CRISPR Therapeutics, Twist Bioscience, Caredx, Iovance, Invitae, Exact Sciences, Fate Therapeutics, Regeneron Pharmaceuticals

You can see that there’s some overlap between the different funds and their positions. Many of these companies have used their explosive growth to fund efforts in other sometimes unrelated sectors. ARK has had an extremely impressive year with all five of these categories. Time will tell how 2021 works for them.

LIT: Global X Lithium & Battery Tech ETF

LIT boasts a 4 star Morningstar rating and holds nearly $2 billion in assets. As of November 30, 2020, 43.3% of their assets are based in China.

Annual percentage return in 2020: 124.64%
Dividend: 0.40% biannually
01/04/21 trading price: $66.30
Top holdings: Albemarle, Ganfeng Lithium, Tesla, Contemporary Amperex Technology, BYD Company, Samsung, Eve Energy, Panasonic, LG Chem, Yunnan Energy

ICLN: iShares Global Clean Energy ETF

According to their website, this ETF “seeks to track the investment results of an index composed of global equities in the clean energy sector.” Although ICLN saw very little action from 2016–2018, it has since seen near exponential growth in 2020. With world leaders championing clean energy and more businesses proving the viability of working towards these goals, I believe ICLN is just getting started when it comes to growth.

Annual percentage return in 2020: 141.24%
Dividend: 0.29% biannually
01/04/21 trading price: $28.85
Top holdings: Plug Power, Enphase Energy, Meridian Energy, Xinyi Solar, Verbund, Siemens Gamesa Renewable Energy, Vestas Wind Systems, Contact Energy, Orsted, First Solar

TAN: Invesco Solar ETF

Another clean energy ETF, TAN is based on the MAC Global Solar Energy Index and invests at least 90% of its total assets in those securities.

Annual percentage return in 2020: 237.63%
Dividend: 0.09% annually
01/04/21 trading price: $105.78
Holdings according to the MAC Global Solar Energy Index: Enphase Energy, SolarEdge Technologies, Xinyi Solar, Sunrun, First Solar, Scatec Solar, Daqo New Energy, Hannon Armstrong

Things to Consider

For those of you who looked up some of the individual companies in these ETFs, you may have seen that some of their annual returns were many times that of the ETF. For me, there are three key advantages to investing in ETFs over individual stocks:

By nature, ETFs represent a collection of individual securities (that can be stocks). Investing in ETFs is often an easy way to diversify your positions.
ETFs are managed (though not as much as mutual funds) so you get the benefit of investing in the expertise of the individuals responsible for the performance of the security.
Most ETFs pay dividends. According to Fidelity, “if a stock is held in an ETF and that stock pays a dividend, then so does the ETF.” It’s always nice to receive an extra payment here and there. For extra growth, you can easily reinvest your dividends if you enable DRIP.

When I first started investing, I scoffed at the idea of investing in an ETF. I believed in individual companies and wanted to have higher stakes with them. However, over time, I realized how hard it is for me to beat the market.

I currently have positions in all of these tickers as well as individual stocks of my choosing, and I am looking to increase my positions for the long term. Let me know what your thoughts are on these ETFs and if there are any that I missed!