Blue Haven

A specialized ETF for aggressive growth investing

By August 18, 2019 No Comments

We recently came across a new ETF for clients seeking aggressive growth. This is the riskiest type of investment choice and is certainly not suitable for the average investor. However, if you have a long-term time horizon and can accept volatility, aggressive growth is a strategy you may be comfortable with. In addition, you can consider dedicating only a small portion of your portfolio to aggressive growth. The first place most aggressive growth investors look for exposure is the technology sector.

Aggressive growth exposure with CLOU

One specialized technology ETF we’ve bought recently is the Cloud Computing ETF, CLOU, from Global X. CLOU invests in the fastest growing cloud computing technology stocks. These include well-known companies like Amazon and Netflix. But CLOU also owns smaller companies like Zscaler, a cloud-based cybersecurity provider. We like CLOU as an aggressive growth ETF because it focuses on a growing industry: cloud computing. The global cloud computing market is expected to grow to $620 billion in 2023 from $270 billion in 2018.

3 factors we considered

We considered 3 main factors when choosing to invest in CLOU:

  1. Assets under management: CLOU launched in April 2019 and has already accumulated $500 billion in assets. This is a sign of market confidence in the long-term potential of the ETF.
  2. Expense ratio: CLOU’s expense ratio is 0.68. This is not too expensive for an active fund that provides niche market exposure.
  3. Low portfolio overlap: Many of the stocks found inside CLOU are not popular investments for other index funds we invest in. As a result, we have less concern about duplicating our investment choices.

As an added bonus, CLOU is free to trade at Charles Schwab, where we custody client assets. That means we can buy and sell shares in CLOU without generating a commission. This helps keep transactions costs down, and allows us to swap CLOU in or out of portfolios as client needs and objectives change.

CLOU is a high-risk ETF that is not a suitable investment for the average investor. Because the ETF just launched in April 2019, we have very little historical data to rely on when evaluating the fund. However, for the aggressive growth investor, CLOU offers unique exposure to a growing market trend. As more time passes, we’ll be able to better evaluate CLOU and how it fits into our suite of investments.

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