Right now might not seem like the best time for exchange-traded funds (ETFs) that focus on retail. After all, traditional brick-and-mortar stores are in trouble. Amazon.com, Inc. (NASDAQ:AMZN) is bearing down on the space, and new rumors that it might buy out Target Corporation (NYSE:TGT) are adding fuel to the already enormous retail fire. With the future of retail this uncertain, finding good retail ETFs to buy seems pretty daunting.
If you keep an open mind, however, finding solid retail ETFs is possible. Retail isn’t dead, but it is changing … drastically. If you want to invest in the space, you have to know where it’s heading in the years to come.
Which is why I’ve put together this list of five retail ETFs to buy to invest in the future of retail. Some of them are more in line with what you’d expect, while others reach outside of the box.
Retail ETFs to Buy: Amplify Online Retail ETF (IBUY)
Expense Ratio: 0.65%, or $65 annually per $10,000 invested
YTD Returns: 4.5% vs. 2.5% for the S&P 500
This list of retail ETFs to buy starts with an obvious choice: Amplify Online Retail ETF (NASDAQ:IBUY). As noted earlier, traditional brick-and-mortar retail is dying off, while online retail is taking over. However, it’s not that simple — every big retail name is not going to disappear. Many companies have already made moves to adapt to the online world.
As such, IBUY focuses on companies that are a part of the continuing online retail trend, but it doesn’t completely abandon physical retail. Instead, it requires that its holdings make 70% or greater of their sales through virtual means. Top holdings include companies like traditional retailer Lands’ End, Inc. (NASDAQ:LE), online retail marketplace Etsy Inc (NASDAQ:ETSY) and travel companies like Expedia Inc (NASDAQ:EXPE).
This is one of the better retail ETFs to buy, as “[g]lobal online sales … [are] expected to grow 137% by 2021” and “[t]he amount of online buyers worldwide … [is] expected to grow 53% by 2021.”
Retail ETFs to Buy: ProShares Decline of the Retail Store ETF (EMTY)
Source: Kevin Dooley Via Flickr
Expense Ratio: 0.65%
YTD Returns: 1.5%
The ProShares Decline of the Retail Store ETF (NYSEARCA:EMTY) is specifically designed for investors that are interested in profiting from the death of brick-and-mortar retail. EMTY grants investors profits based on short, single-day exposure to the Solactive-ProShares Bricks and Mortar Retail Store Index.
This makes it one of the more unique retail ETFs on the list, but also one of the more risky and complicated plays. As noted in the ProShares prospectus: “The Fund is different from most exchange-traded funds in that it seeks returns inverse to its underlying index and only on a daily basis. The Fund may not be suitable for all investors and should be used only by knowledgeable investors who understand the potential consequences of seeking daily inverse investment results.”
Still, for those who have faith in the continuing demise of traditional retail and want to profit from it, EMTY is one of the most direct ways to do so.
Retail ETFs to Buy: ProShares Long Online/Short Stores ETF (CLIX)
Expense Ratio: 0.65%
YTD Returns: 5%
EMTY gives investors a chance to make short-term plays based on the death of traditional retail, but the ProShares Long Online/Short Stores ETF (NYSEARCA:CLIX) is another new offering from ProShares that adds another layer to this approach.
Rather than merely shorting traditional retail names, CLIX also gives investors access to long-term positions in growing online retail names. This gives investors the “opportunity to benefit from both outperforming online and underperforming physical retailers.” In essence, CLIX aims to fully capture profits from retail’s current transformation.
The unique design of this retail ETF means that some of its daily holdings are constantly shifting. At the time of this writing, however, current names include big-time online retailers you’d expect like Amazon and Alibaba Group Holding Ltd (NYSE:BABA) and a few up-and-comers like Shutterfly, Inc. (NASDAQ:SFLY).
Retail ETFs to Buy: Vanguard Consumer Discretionary ETF (VCR)
Source: David DeHetre via Flickr
Expense Ratio: 0.10%
YTD Returns: 3%
This next ETF to buy is for those who want less narrow exposure to retail, but still want to profit from an overall emphasis on consumer spending habits. It might not be as intricate as some of the other retail ETFs to buy on this list, but the Vanguard Consumer Discretionary ETF (NYSEARCA:VCR) does as its name implies.VCR focuses on “companies that manufacture products and provide services that consumers purchase on a discretionary basis.”
Notably, the broader consumer-based focus of VCR has allowed it to avoid massive damage from the decline in brick-and-mortar retail, while still including top traditional retail names like Home Depot Inc (NYSE:HD). Its top holdings also comprise restaurants like McDonald’s Corporation (NYSE:MCD) and film/entertainment companies like Netflix, Inc. (NASDAQ:NFLX).
Retail ETFs to Buy: Columbia India Consumer ETF (INCO)
Source: Igor Ovsyannykov Via Unsplash
Expense Ratio: 0.89%
YTD Returns: 2.4%
In the same vein as VCR, the Columbia India Consumer ETF (NYSEARCA:INCO) takes a step out of the narrow retail ETF box and provides broad exposure to consumerism. What sets this retail ETF apart from VCR, however, is its focus on both consumer discretionary and consumer staples companies in India, one of the top emerging markets.
As such, INCO is an attractive option for growth-minded investors interested in exposure to retail-based stocks outside of the U.S.
Many of its top holdings are likely unfamiliar to most investors — food and beverage company Nestle India Ltd, car part manufacturer Motherson Sumi Systems Ltd and motorcycle manufacturer Hero Motocorp Ltd, for example. But INCO’s performance is impressive. Over the past year, it outperformed the S&P 500 by roughly 40%. Investors can expect it to continue this out-performance as things heat up in India in the years ahead.
Note that 60% of its holdings are allocated to the consumer discretionary sector, while consumer staples finish the remaining 40% allocation. Of these holdings, a large portion focus on automobiles (25%), personal care products (18%) and auto components (18%).
Robert Waldo is an Assistant Editor at InvestorPlace. As of this writing, he did not hold a position in any of the aforementioned securities.