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Exchange-traded funds (ETFs) can be excellent buys for investors looking to diversify their portfolios.
Index trackers can allow individuals to spread risk without having to compromise on returns. Funds tracking the S&P 500, for instance, have risen roughly 85% over the last five years.
Some ETFs have done even better, although this has required targeting specific sectors or regions. Take the following funds, which have risen 100% or more in five years or less.
I think they could double again in value between now and 2031 too and are worth considering. I could be wrong, of course, but here’s why I feel that way.
An ETF I own
The L&G Gold Mining (LSE:AUCP) ETF has surged 291% in value since September 2021. It’s boomed on the back of the soaring precious metal price, which is up 143% in that time.
The fund’s focus on gold miners rather than the yellow metal itself explains this outperformance. During bull markets, mining profits rise more sharply than bullion itself, as revenues rise while companies’ costs remain relatively stable.
Can this L&G safe-haven fund keep surging, though? I think so, as economic and political turbulence grows across the world. Gold has surged 128% already in the last five years due to such factors.
Bear in mind that the fund could underperform if some miners experience production issues. That said, with a wide range of holdings (44 in total), the fund is well placed to cushion such setbacks.
Case for the defence
Growing geopolitical instability has also boosted the performance of defence-related ETFs. Take the VanEck Defense (LSE:DFNG) fund, which has risen 175% in value since its launch in March 2023.
It’s a period in which NATO nations — particularly those in Europe — have been rapidly rearming. Russia’s invasion of Ukraine in 2022 kickstarted a new global arms race that’s sadly tipped to run and run.
For instance, the United Nations expects global defence spending to reach $4.7trn-$6.6trn by 2035. To put that into perspective, spending reached record levels of $2.7trn last year.
VanEck Defense holds shares in defence heavyweights including RTX and Thales. Today its largest holding is software giant Palantir. This gives the fund more added growth potential as warfare evolves. However, it does leave the fund more vulnerable to a tech-sector sell-off.
A 329% rise!
A sharp fall in technology stocks is certainly possible as worries over a possible ‘AI bubble’ grow. Yet over the long term, I’m optimistic companies like software developers and semiconductors can add to recent extraordinary gains as the digital economy booms.
By extension, I think the VanEck Semiconductor (LSE:SMH) could surge again over the next five years. Since September 2021, it’s risen an incredible 329% in value.
It’s not just widescale AI adoption that could power this ETF to new heights. The chips made by key holdings like Nvidia are used across many applications, giving the fund exposure to other hot growth trends like robotics, consumer electronics and quantum computing. Its why Gartner analysts think the market will double in size between 2025 and 2026 alone, to $1.6trn.
In total, this VanEck fund holds shares in 26 semiconductor manufacturers. I believe these stocks can keep soaring, along with the top growth share we’ve picked out below.
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Royston Wild owns shares in L&G Gold Mining.
This story originally appeared on Motley Fool
