After a rather disappointing September, the U.S. stock market gave up every bit of its gains made in the prior two months to finish the third quarter effectively flat – with the S&P 500 (.SPX) index squeaking up from a close of 4,292 on June 30 to a close of just 4,307 after the bell Sept. 30.
But while broad benchmarks like the S&P are good measures of the general health of the market as a whole, it's important to realize there are always targeted opportunities to profit in any market environment. And the following seven tactical exchange-traded funds prove this out, with double-digit gains in Q3 despite broader headwinds on Wall Street – with the best performing ETFs adding more than 56%.
If you're interested in financial stocks as a play on economic growth, consider one of these top exchange-traded funds as a simple way to gain exposure to the sector.
Check out these top exchange-traded funds in Q3.
Importantly, the funds on this list do not include "leveraged" funds that seek to deliver two or three times the return of a benchmark, and exclude illiquid ETFs without significant assets under management or daily trading volume.
The largest of several India-focused ETFs out there, iShares MSCI India ETF (INDA) stands out because of its size and liquidity as well as a slightly lower annual expense ratio than peers like the WisdomTree India Earnings Fund (EPI) or the iShares India 50 ETF (INDY).
But on the whole, all these funds have a very similar approach with a nation-specific strategy dependent on the fortunes of India. Turns out that in Q3, this was a great region to focus on for all of these funds because of short-term tailwinds and continued long-term growth.
In fact, Goldman Sachs recently said that in three years it expects India's stock market to be fifth in the world – ahead of France, the U.K. and Canada. With troubles in other regions, investors have definitely found the appeal of this growth-oriented country over the last few months.
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iShares MSCI India ETF
TOTAL ASSETS: $6.4 billion Q3 PERFORMANCE: +10%
Benchmarked to the price of cap-and-trade carbon allowances, this KraneShares ETF (KRBN) offers investors exposure to an asset class that is increasingly important in the age of climate change and hedging emissions-related risks.
Carbon credits represent one metric ton of carbon and can be earned by abstaining from environmentally harmful activities they might typically have to do in the course of their business; companies with vows to remain carbon neutral often have to buy them to offset their pollution.
And thanks to recent dynamics, including tighter climate-related policies in Europe, carbon prices hit an all-time high in September. As a result, this ETF saw significant gains in the third quarter even as other investments ran into headwinds.
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KraneShares Global Carbon ETF
TOTAL ASSETS: $920 million Q3 PERFORMANCE: +11%
Holding 45 stocks that are related to uranium mining and the production of nuclear energy components, Global X Uranium ETF (URA) has seen a big upswing as many people concerned with the environmental impact of fossil fuels are showing renewed support for uranium as a power source.
Case in point, major miner Cameco Corp. (CCJ) has more than doubled in the last year, including its highest levels since 2014 after continued success in Q3. Also of note: The NorthShore Global Uranium Mining ETF (URNM) has similar holdings but actually did much better with 22% returns in Q3.
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Global X Uranium ETF
URNM is dwarfed by URA size-wise, however, as it only has $640 million or so in total assets under management. With that in mind, URA wins out as one of the best performing ETFs last quarter.
TOTAL ASSETS: $960 million Q3 PERFORMANCE: +12%
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Global X Lithium & Battery Tech ETF
The second-largest ETF on this list as measured by assets under management, Global X Lithium & Battery Tech ETF (LIT) is a popular investment option right now for obvious reasons.
While Tesla Inc. (TSLA) was once written off as a niche automaker by naysayers, it's clear that the electric vehicle revolution is here to stay – and is reshaping both the car industry as well as the broader stock market.
LIT holds about 40 top stocks including EV manufacturers like Tesla as well as lithium miners like Albemarle Corp. (ALB) that are suppliers of key battery technology components. The tailwind created by the EV disruption has lifted this ETF even as the broad stock market has seen some volatility lately.
TOTAL ASSETS: $4.7 billion Q3 PERFORMANCE: +13%
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VanEck Rare Earth/ Strategic Metals ETF
So-called rare earth metals are chemically similar elements including scandium and yttrium.
They are not truly rare from a quantity perspective, but the challenge is that where they occur naturally these metals can be quite difficult to separate from other materials and process into usable forms.
At the same time, their properties are incredibly in-demand across high-tech industries including electronics, clean energy, aerospace and automotive applications. As the global economy has seen an uptick in demand but continued supply chain disruptions, the bottleneck on rare earths has driven up prices – and driven up VanEck Rare Earth/Strategic Metals ETF (REMX) as a result.
TOTAL ASSETS: $938 million Q3 PERFORMANCE: +21%
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Breakwave Dry Bulk Shipping ETF
Smaller ETF provider Breakwave Dry Bulk Shipping ETF (BDRY) offers a very targeted fund.
This investment product is tied not to shipping stocks, but rather to freight futures – that is, derivatives contracts that reflect the expected future level of freight rates.
BDRY was in the right place at the right time as continued supply chain challenges have driven global shipping rates to new heights. There are continued pressures driving up forecasts for the future, and this ETF has risen six-fold since Jan. 1 – including an impressive run in Q3 on top of prior gains, making BDRY one of the top performing ETFs in the market.
TOTAL ASSETS: $127 million Q3 PERFORMANCE: +23%
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United States Natural Gas Fund LP
Far and away the biggest winner in Q3 was United States Natural Gas Fund LP (UNG), driven by a surge in natural gas prices.
The fossil fuel has been called the best bridge between "dirtier" energy sources that rely on coal and are increasingly being phased out in the response to climate change.
However, increasing demand, thanks to a broader economic recovery in 2021, along with this structural shift in the market has roughly doubled gas prices compared to where they were a year ago. UNG has surged as a result – as have similar but smaller funds including the iPath Series B Bloomberg Natural Gas Subindex Total Return ETN (GAZ).
TOTAL ASSETS: $411 million Q3 PERFORMANCE: +54%
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of the Best Performing ETFs in Q3
iShares MSCI India ETF (INDA)
KraneShares Global Carbon ETF (KRBN)
Global X Uranium ETF (URA)
Global X Lithium & Battery Tech ETF (LIT)
VanEck Rare Earth/Strategic Metals ETF (REMX)
Breakwave Dry Bulk Shipping ETF (BDRY)
United States Natural Gas Fund LP (UNG)