5 Best ETFs for June 2021 – ETF Trading Tips

ETF investing has become very popular over the last decade. The total assets under passive investing exceed that under active investing. What are the trading tips for ETF investing and what are the best ETFs that you can buy in June 2021?

According to ETF.com, there are 1819 ETFs traded in the US markets and the AUM (asset under management) of equity ETFs is over $5 trillion. Now, while choosing the best ETF there are several aspects that you should consider. Firstly, the ETF investing strategy should align with your investment goals. Once you have finalized the investing strategy you can then choose the best fund in that category by looking at the asset size, liquidity, and expense ratio.

Energy prices are looking strong in 2021 after a turbulent 2020 where the WTI futures had briefly turned negative for the first time in history. However, energy prices have rebounded in 2020 and crude oil is comfortably above $70 per barrel. Bank of America sees better days ahead for crude oil and expects them to hit $100 per barrel next year. Mining giant Glencore and Goldman Sachs, which had correctly predicted copper hitting $15,000 per metric ton, also see crude oil at $100 as a real possibility. You can invest in commodities through ETF also.

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According to Bank of America strategist Francisco Blanch “There is plenty of pent-up oil demand ready to be unleashed.” Notably, crude oil demand has picked up in 2021 while supply growth has been tepid as the OPEC+ has been quite disciplined with adding more barrels. After the Iran elections, the deal between the US and the Islamic Republic now looks tougher which takes away the risk of Iranian crude oil exports.

Summing up the energy market dynamics, Blanch said “In short, demand is poised to bounce back and supply may not fully keep up, placing OPEC in control of the oil market in 2022.” With the outlook for energy markets looking positive in the medium term, there are a few ETFs that you can invest to play the theme.

1. SPDR S&P Oil & Gas Exploration & Production ETF (NYSE: XOP)

XOP invests in the S&P Oil & Gas Exploration & Production Select Industry Index and gives you exposure to oil and gas producers. The ETF has over $4 billion in assets and its gross expense ratio is 0.35%. The ETF has a total of 54 stocks with a weighted average price to book value of 1.7 and a one-year blended forward PE multiple of 13.7x.

The fund has a large-cap bias and the weighted average market capitalization is just under $25 billion. There is sufficient liquidity in this ETF with average trading volumes of around 7 million. The fund is up 64% so far in 2021 and is outperforming the markets by a wide margin. XOP trades above its 50-day, 100-day, and 200-day SMA (simple moving average) which signals an uptrend. The 14-day RSI (relative strength index) is neutral at 57.6x.

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2. Energy Select Sector SPDR Fund (NYSE: XLE)

XLE is another ETF to play the energy industry. It invests in oil, gas, and consumable fuels, and energy equipment and services. XOP is mainly an upstream energy ETF. XLE is up 44% so far in 2021. While the ETF is underperforming XOP, it is outperforming the S&P 500 by a wide margin.

XLE has a gross expense ratio of only 0.12% while it has almost $25 billion in assets. On average, 30 million units are traded on a daily basis which makes it very liquid. However, it has a concentrated portfolio and holds 22 stocks with a weighted average book value of 1.87 and a forward PE of 18.7x

XLE has found strong support at its 50-day SMA and also trades above the 100-day and 200-day SMA. Its 14-day RSI of 52.7 is a neutral indicator. Overall, given the expected rise in crude oil prices, XLE looks like a good ETF to buy in June 2021.

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3. The SPDR S&P Metals & Mining ETF (XME)

Material prices have been strong in 2021 with copper hitting its all-time high. US steel prices are also trading at record levels. XME can be a good play on the US metal and mining industry. The ETF has over $2 billion in assets and charges a gross expense ratio of 0.35%. It has 30 holdings with a weighted average price to book value of 2.3 and a forward PE multiple of 10x. An average of 5 million units is traded every day which looks quite good looking at the fund size.

XME’s portfolio is overweight on US steel companies which makes it attractive. Given the uptrend in US steel stocks, XME looks like a good ETF to buy. The ETF is up 26% so far in 2020 and is outperforming the markets. However, it has come off its highs and the drop could be a good buying opportunity.

XME fell below the 50-day SMA but has found support near the 100-day SMA. The ETF is getting near oversold levels with a 14-day RSI of 38.8x.

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4. VanEck Vectors Gold Miners ETF (GDX)

gdx etf

After hitting their all-time highs in 2020, gold prices have retreated from the highs. The US Federal Reserve’s hawkish stance on interest rates has further dampened market sentiments and gold prices have fallen below $1,800 per ounce. Meanwhile, gold looks like a contra bet after the fall and a hedge against rising inflation.

There are several ways to invest in gold. GDX, which invests in gold mining companies, is a leveraged play on gold prices. This basically means that its price rises or falls more than the movement in gold prices. The ETF is currently down 24% from the peaks and is in the bear market territory having fallen over 20% from the highs. That said, the recent crash could be a good buying opportunity.

Commenting on gold’s outlook, VanEck says “We expect catalysts to emerge in the second half of 2021, which may include excessive inflationary expectations, continued Central Bank asset purchases and rising commodity prices. Our long-term bull market view for gold remains intact.”

It also adds, “Gold companies remain a compelling value buy, in our view. Balance sheets continue to get stronger and miners are remaining disciplined in their capital investment.”

The ETF has assets of around $15 billion with a gross expense ratio of 0.51%. It invests in gold companies across the world. Canadian gold companies account for 43% of the portfolio followed by US gold companies at 20%. The ETF meanwhile looks bearish on the charts and has fallen below the 50-day, 100-day, and 200-day SMA. It might however be getting oversold now with a 14-day RSI of 32.3. RSI values below 30 are associated with oversold positions.

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5. SPDR S&P 500 ETF Trust (NYSE: SPY)

spy etf

If you are an equity investor, an S&P 500 ETF should be a core part of your portfolio. Berkshire Hathaway chairman Warren Buffett has been advocating investing in S&P 500 index funds due to their lower cost. At last year’s annual shareholder meeting he said “I don’t think most people are in a position to pick single stocks; a few may be, but on balance, I think people are much better off buying a cross section of America and just forgetting about it.” He was referring to the S&P 500 as a cross-section of America.

With the S&P 500 near record highs, many wonder whether it is the right time to invest in an S&P 500 ETF. However, instead of timing your entry, the ETF can be a core holding in the portfolio. Looking at the technicals, it has found strong support at the 50-day SMA while the 14-day RSI of 55.8 is neutral. In terms of liquidity, it is highly liquid and is the largest ETF with assets of over $360 billion. On average, 73 million units are traded daily. It has an expense ratio of 0.0945%.

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About Mohit PRO INVESTOR

Mohit Oberoi is a freelance finance writer based in India. He has completed his MBA with finance as majors and also holds a CFA charter. He has over 14 years of experience in financial markets. He has been writing extensively on global markets for the last seven years and has written over 7,500 articles. He covers metals, electric vehicles, asset managers, tech stocks, and other macroeconomic news. He also loves writing on personal finance and topics related to valuation.