What Is an ETF?
Lesson number one: what is an ETF? An exchange-traded fund or ETF is an investment fund that tracks different types of index stocks or assets, just like a mutual fund. The difference between a mutual fund and an ETF is that you can buy and sell ETFs as you would an individual stock. An ETF can contain different investment options, like stocks, bonds, commodities, and even a combination of all investment types. You can own multiple stocks if you buy a single ETF. It can hold hundreds of underlying assets from different sectors and industries, so diversification will not be a problem. ETFs are one of the best investments you can make because they’re more cost-effective and liquid than mutual funds. They also have lower expense ratios and minimal broker commissions than individual stocks. There are different kinds of ETFs available in the stock market. Whether you’re leaning into tech, consumers, or the top 500 companies in the US, there’s an ETF for that.
What Is a Fintech ETF?
Now you know what an ETF is, you need to know which ETFs to buy. One of the emerging industries now is fintech, and there’s an ETF for that! Fintech ETFs are investment funds that basket the top stocks in the fintech industry. Fintech combines the finance and technology industries, which are, in popular opinion, two of the booming industries that will make or break the future. It might seem intimidating at first when you’re researching fintech. But, it’s everywhere now, and you use it every day, too. Your transactions with your Visa or Mastercard are an example of fintech. Using online banking and PayPal is also fintech! All the money apps you have on your phone and even online shopping is fintech. So, why not invest your money in the things you first-hand use and believe in? There are a lot of fintech companies today that are innovating for the future. It’s assuring to see that the fintech industry doesn’t cling to the traditional banking practices the banking sector holds onto. Investing in fintech ETFs is a wise decision.
How Do You Invest in Fintech ETF?
So, how exactly do you invest your money in fintech ETFs? Here are some helpful tips you can follow to get into the fintech bandwagon to financial freedom:
Open a Brokerage Account
Find an investing platform that you can use to participate in the stock market. Fintech ETFs are available on most stock market platforms, and all you have to do is sign up online so you can start your investing journey. If you don’t know which platform to open your brokerage account, you can check out our most comprehensive stock market apps article.
Research Fintech ETFs
Before you hit buy on your account, you have to ensure that you’ve done proper research on the fintech ETFs you’re eyeing. We will go more into detail on the best fintech ETFs to buy later on. There is a wide array of fintech ETFs, and even though they’re all under fintech, it doesn’t mean they all have the same underlying assets. It pays to be extra careful and knowledgeable on where you put your assets in. When choosing a fintech ETF, you must consider management fees, commissions, holdings, performance, and trading prices.
Think About a Trading Strategy
Once you decide on the fintech ETFs you want, you have to consider a trading game plan. Set up a strategy on when and how often you are going to buy the ETFs. Remember, the stock market is good for those who wait and hold. So, if you’re in it for the long run, you can do a simple trading strategy called dollar-cost averaging. It’s where you spread your investment costs over a period of time to avoid dramatic volatility. You can protect yourself from risks and substantial loss with dollar-cost averaging because you’ll be buying from different periods with different market prices. You get more opportunities on low fintech ETF prices compared to buying bulk.
15 Fintech ETFs You Can Invest In
Now that we’ve narrowed down all the basics. Here are our top picks for the 15 best fintech ETFs that can help you reach your financial goals.
Ecofin Digital Payments Infrastructure Fund (TPAY)
Expense Ratio: 0.40% Total Holdings: 54 When you look into TPAY’s fact sheet or summary prospectus, their top 10 holdings include AfterPay, Square Inc, DocuSign, Fiserv, and many more fintech software companies. This ETF invests in fintech companies that focus on the infrastructure needed for digital payments and transactions. The TPAY fintech ETF offers you a balanced exposure on both the banking sector and the fintech industry, with American Express and PayPal also among its 54 holdings. This fintech ETF ventures in innovative forms of digital payments, such as mobile, P2P machines, and point-of-sale tools. Visit Ecofin Digital Payments Infrastructure Fund website
ETFMG Prime Mobile Payments (IPAY)
Expense Ratio: 0.75% Total Holdings: 47 IPAY is one of the best fintech ETFs you can add to your portfolio. It tracks the Prime Mobile Payments Index and tries to mirror its yield performance and price. This fintech ETF takes advantage of the rise of the digital age of financing and the masses’ preference for hassle-free transactions. IPAY invests heavily in the electronic and mobile payment sector, with Visa, PayPal, Mastercard, and Square Inc among their top holdings. Visit ETFMG Prime Mobile Payments website
Amplify Transformational Data Sharing ETF (NYSE: BLOK)
Expense Ratio: 0.71% Total Holdings: 47 BLOK is a fintech ETF must-have because it invests in companies involved in the development of blockchain technology. It doesn’t track any index compared to other fintech ETFs; instead, it invests in its own global equity portfolio. BLOK holdings focus on value and growth stocks from companies that believe in blockchain technology. This fintech ETF has big-name fintech companies under its belt, with Microstrategy, PayPal, Square, Nvidia, and Coinbasse among its 47 holdings. Visit Amplify Transformational Data Sharing ETF website
ARK Fintech Innovation ETF (ARKF)
Expense Ratio: 0.75% Total Holdings: 35 – 55 According to some stock market veterans, ARK is somewhat new in the game. But this didn’t stop them from pushing to the front with their tech-focused ETFs. ARK’s fintech bet is the Fintech Innovation ETF. It invests in various foreign and domestic companies involved in the innovation of fintech that can change the way the financial sector operates. ARKF is an actively managed fintech ETF that invests in digital wallets, blockchain, mobile payments, and many more. Its top holdings include Square, the company behind Cash App, Shopify, Zillow, and Coinbase. Visit ARK Fintech Innovation ETF website
iShares U.S. Financial Services ETF (IYG)
Expense Ratio: 0.42% Total Holdings: 105 Now, fintech isn’t what it is now without the banking sector. It may be one of fintech’s competitors, but you can’t deny its significant influence on the industry’s success. The iShares US Financial Services ETF is a fintech ally. It invests mostly in American investment banks, credit card companies, securities exchanges, and commercial banks. This fintech ETF features JP Morgan Chase & Co in its top 10 holdings. Chase has recently announced the launch of its own actively managed Bitcoin fund offering to its clients. Not only that, but the bank also established JPM Coin to make instant payments utilizing blockchain technology. Visit iShares U.S. Financial Services ETF website
Innovation Shares NextGen Protocol ETF (KOIN)
Expense Ratio: 0.95% Total Holdings: 43 KOIN’s top holding is Nvidia Corp, investing 4.63% of its whole fund. If you’re not familiar with Nvidia Corp, they’re the company behind the hardware used for crypto mining. The Innovation Shares NextGen Protocol ETF tracks the ATFI Global NextGen Fintech Index, which is fairly exposed to companies involved in blockchain technology. This fintech ETF can give you another way to participate in the cryptocurrency market without the volatility of owning actual crypto. Check out Innovation Shares NextGen Protocol ETF here
Global X FinTech ETF (FINX)
Expense Ratio: 0.68% Total Holdings: 54 Global X’s FINX is one of the oldest fintech ETFs available in the market. It’s been standing strong for over five years now, tracking the Indxx Global FinTech Thematic Index. FINX invests in fintech companies that innovate outdated processes in investing, insurance, third-party lending, and fundraising. This ETF has solid exposure to the fintech industry that provides online and mobile solutions to consumers. Visit Global X FinTech ETF website
ARK Innovation ETF (ARKK)
Expense Ratio: 0.75% Total Holdings: 35 – 55 If you’re looking for an ETF that can give you diversified tech exposure with fintech still at the forefront, ARKK might be the one for you. Fund Intelligence during The Mutual Fund Industry and ETF Awards recognized ARKK as the Active ETF of the Year in 2019. ARKK is a fintech ETF that aims for long-term capital growth by investing in companies that promote “disruptive innovation.” According to ARK, technological advances will change the way the world works. That’s why they’re all-in on companies that will spark the genomic revolution, next-generation internet, industrial innovation, and fintech innovation. Visit ARK Innovation ETF website
Vanguard Information Technology ETF (VGT)
Expense Ratio: 0.10% Total Holdings: 358 stocks Vanguard is one of the top companies offering ETFs, from tracking the S&P 500 Index to sectors like information technology and fintech. Most civilians or first-time investors prefer Vanguard ETFs because of their considerably lower expense ratios. Unlike most of the fintech ETFs on the list, VGT is passively managed. It tracks the performance of a benchmark index in the information technology sector. Sure, VGT might be information technology-focused on its investments, but that still entails fintech. Its top 10 holdings include Nvidia Corp, PayPal, Mastercard, and Visa. Visit Vanguard Information Technology ETF website
iShares Global Tech ETF (IXN)
Expense Ratio: 0.46% Total Holdings: 128 Another ETF from iShares that can give you decent exposure to the fintech industry is IXN. This fintech ETF tracks an index with global equities in the tech sector. IXN invests in companies not only in the US but from around the globe leading in the development of information technology, fintech, computer hardware and software, and electronics. Apple, Microsoft, Nvidia Corp, Visa, PayPal, and Samsung are among IXN’s top holdings. Visit iShares Global Tech ETF website
Fidelity MSCI Information Tech ETF (FTEC)
Expense Ratio: 0.08% Total Holdings: 352 FTEC tracks the performance of the MSCI USA IMI Information Technology Index to provide investment returns. This is a great fintech ETF to consider. Its holdings combine most successful tech companies making way for innovation in the fintech and information technology sector. This includes Intel, Microsoft, Mastercard, Visa, Apple, and PayPal. Visit Fidelity MSCI Information Tech ETF website
Global X Video Games & Esports ETF (HERO)
Expense Ratio: 0.50% Total Holdings: 40 Video games and esports also play a huge role in the fintech industry. Think about all the in-app purchases made in each game; that’s fintech right there. So, if you’re a gamer and want to invest your money in a fintech ETF, HERO is perfect. HERO invests in companies involved in developing video games and supports the distribution of streaming content in the esports industry. This ETF also backs the production of hardware essentials for gaming, with Nvidia Corp as its top holding. According to Global X, the global gaming market increased 20% from 2019 to 2020—higher than professional sports and Hollywood. Though past performance does not determine the ETF’s success in the future, experts believe the gaming industry has nowhere to go but up in the future market. Visit Global X Video Games and Esports ETF website
First Trust Cloud Computing ETF (SKYY)
Expense Ratio: 0.60% Total Holdings: 66 The SKYY fintech ETF tracks the ISE CTA Cloud Computing Index and invests in companies in the cloud computing industry. The cloud computing industry is also vital to fintech because it delivers various services through the internet. And most mobile and electronic transactions are only possible via the internet. Check out First Trust Cloud Computing ETF here
Goldman Sachs Innovate Equity ETF (GINN)
Expense Ratio: 0.50% Total Holdings: 463 GINN ETF focuses its assets on companies that develop technological innovations across all industries and sectors. This fintech ETF follows the performance of the Solactive Innovative Global Equity Index to generate investment returns. Goldman Sachs Innovate Equity ETF believes in five themes: a data-driven world, human evolution, finance reimagined, the new age consumer, and the manufacturing revolution. They employ a data-driven approach in their innovative portfolio that should stand the test of time. Visit Goldman Sachs Innovate Equity ETF website
First Trust Indxx Innovative Transaction & Process ETF (LEGR)
Expense Ratio: 0.65% Total Holdings: N/A One of the best fintech ETFs you can invest in now is LEGR. It tracks the yield and price of the Indxx Blockchain Index. With blockchain fully taking the finance sector by storm, it’s wise that First Trust’s LEGR ETF invests heavily in companies that develop services and products to improve blockchain technology. This fintech ETF has Nvidia Corp, Microsoft, and Oracle Corp are among its top holdings. Check the First Trust Indxx Innovative Transaction & Process ETF here
Why You Should Invest in Fintech ETFs
Fintech is changing how people do their finances and spend their money. It has opened different opportunities whilst lowering service costs and successfully bringing convenience. So, why not invest in something that will help you too? Investing in fintech ETFs will open more innovations that will ultimately benefit you. With fiat currency slowly but surely transitioning to pixels, neobanks with better rates influencing big banks, and your mobile phone now functioning as your wallet—fintech is not going anywhere.
Final Thoughts: The Fintech ETF Market Outlook
According to finance experts, the fintech industry is poised to be worth 26.5 trillion dollars by 2022. More and more investors are moving to a decentralized finance avenue as it grows more popular among consumers. Fintech is now becoming an essential part of the economy and is proving to be a lucrative investment. It might seem too good to be true, but it won’t hurt to get on the bandwagon now. If there’s anything certain about the stock market, it’s that when looked at as a bigger picture, the arrow always goes up. So if you’re serious about financial freedom, choose from the 15 fintech ETFs here and hold till you see green.
