ETFs for the Speculative Investor

Over the last several months it has been more and more popular to take speculative positions in fast moving stocks to try and reap quick profits.  After the majority of broad-based indices appear to have plateaued somewhat in 2014, aggressive investors are starting to look elsewhere for fast returns.

The fuel cell maker Plug Power Inc (PLUG) is the latest trader obsession that has posted stratospheric gains for consecutive weeks now.  The stock started the year below $2.00 per share and traded as high as $11.72 before a 40% single day plunge caught many late adopters by surprise.  The company has become a media darling for its rapid price movement, huge volume spikes, and dislocation from traditional fundamental analysis.

There are a number of risks investing in small speculative companies which is why they so often lead to big gains and horrific losses.  One of the best ways to mitigate the business risk of a single company or concentration of a single sector is to consider a more diversified investment vehicle such as an exchange-traded fund.

I love ETFs because they are transparent, liquid, low-cost, and diversified.  Many of the most well-known ETFs, such as the SPDR S&P 500 ETF (SPY), are geared toward moderate or conservative investors that want to keep pace with an index or specific sector.  However, there are a few aggressive options that speculative investors will love as well.

A relative newcomer to the ETF space is the Renaissance IPO ETF (IPO) which is designed to provide investors with exposure to newly issued public companies before they are included in more traditional broad-based indices.  The IPO market has really heated up over the last several years as more companies are taking advantage of bullish investor momentum amid record issuance.

This ETF has the ability to select a new public company for inclusion in its portfolio after only 5 days of initial trading history.  That means that it can potentially access new business models and economically significant companies very quickly after they are brought to market.  The fund currently has 60 holdings spread amongst a variety of sectors and market cap styles.