Cloud computing was already in the ascendancy when the coronavirus pandemic came along and caused us all to work, learn, and play from home. The pandemic was a perfect catalyst for the increased adoption of cloud computing. For users, it means doing most things via the Web. And for cloud companies, it means hosting content and applications on central servers (accessible from anywhere) rather than on their own office-based infrastructure.
You can invest in cloud computing by buying relevant individual stocks (shares of cloud computing companies) or by buying exchange-traded funds (ETFs) that invest in such stocks. In this guide, we state the case for cloud ETFs, and we identify some of the best.
Where Can I Trade the Best Cloud ETFs?
To trade ETFs, you need a broker, and these days this usually means an online broker. You need one that is properly regulated, provides the trading tools you need, and offers the ETFs you want to buy. Choosing the best broker for you isn’t easy because you won’t have time to try them all, so we’ve already looked for the best brokersin 2021.
What Is a Cloud ETF?
An ETF is like a mutual fund that pools money from many investors and invests it in several stocks (or other assets) that have a particular theme: sometimes simply the stocks of a certain stock index such as the FTSE 100, and sometimes stocks from a specific industry sector. A Cloud ETF invests in the stocks of companies involved with cloud computing.
Like mutual funds, ETFs provide a degree of diversification, so you’re not dependent on the performance of a single stock. Unlike mutual funds, ETFs can be bought and sold during stock market trading hours in exactly the same way that you would buy and sell single stocks, whereas mutual funds can only be bought and sold once per day at their daily valuation price.
Invest in the Best Cloud ETFs in 3 Steps
Open an Account with a Broker
Like stocks, ETFs are bought and sold via a broker. It should take only a matter of minutes to fill out an online broker’s application form, although you will likely have to upload some identification documents. Then, you can fund your account by bank (wire) transfer, credit/debit card, and sometimes additional methods such as PayPal.
Choose the Cloud ETF(s) to Trade
Your broker’s trading platform will present you with a list of assets that are available for trading, including ETFs. Using our list as a guide, and backed by your own research, search or scroll through to find the one(s) you want. You should be able to click each one to see a price chart and other information about the ETF.
Invest in an ETF
The trading ticket for an ETF looks exactly like the trading ticket for a stock. You typically enter a number of shares to buy or an amount of money to invest, then press the “buy” button. You can also use advanced orders such as limit orders (to buy when the price falls to a specified level) and stop orders (to sell you out of an investment if the price starts to go too far against you).
Best Cloud ETFs to Buy Now
Here is our top ten list of cloud ETFs:
- First Trust Cloud Computing ETF (SKYY)
- Global X Cloud Computing ETF (CLOU)
- WisdomTree Cloud Computing UCITS ETF (WCLD)
- Wedbush ETFMG Global IVES
- ARK Next Generation Internet ETF (ARKW)
- ALPS Disruptive Technologies ETF (DTEC)
- Vanguard Information Technology ETF (VGT)
- iShares Global Tech ETF (IXN)
- Emerging Markets Internet & Ecommerce ETF (EMQQ)
- Invesco QQQ Trust ETF (QQQ)
Now, let’s dig deeper into the first five.
1. First Trust Cloud Computing ETF (SKYY)
This ETF was one of the first to open the industry’s eyes to cloud computing, and it focuses on three groups of cloud computing companies: infrastructure-as-a-service (IaaS), platform-as-a-service (PaaS), and software-as-a-service (SaaS) providers. The ETF includes some of the top tech companies such as Microsoft and Amazon.
The SKYY share price has seen an almost uninterrupted rise since 2011 and an acceleration (almost doubling) since March 2020. Its expense ratio is 0.60% and the average spread is $0.05.
2. Global X Cloud Computing ETF (CLOU)
This ETF includes tech titans such as Zoom, Microsoft, Amazon, and Alibaba in its holdings.
CLOU was only incepted in 2019, much more recently than the SKYY ETF. Its share price has almost doubled in the two years since inception but was slightly down for the year at the 2021 mid-point in June.
3. WisdomTree Cloud Computing UCITS ETF (WCLD)
The Nasdaq-traded WCLD ETF includes a basket of stocks related to cloud software and cloud services. For a company to be included in the ETF, it must have enjoyed a 15% growth rate for the last two years and be liquid.
The expense ratio stands at 0.45% and the average spread is $0.05. After more than doubling between February 2020 and February 2021, this ETF’s uptrend seemed to end, but it might have presented investors with an opportunity to buy on the dip before the uptrend continues.
4. Wedbush ETFMG Global Cloud Technology ETF (IVES)
The ETF is similar to CLOU because it also requires companies to get 50% of their total revenues from cloud computing. The assets include non-US companies that mainly provide infrastructure, storage, backup, and cloud software platforms.
Performance has been patchy, with IVES trading more-or-less sideways in the two years between September and 2017 and September 2019. Nevertheless, after the coronavirus crisis that caused most stocks and ETFs to crash in March 2020, the price of this ETF had more than doubled by February 2021 before falling back a bit.
5. ARK Next Generation Internet ETF (ARKW)
Cloud computing companies are not only found within ETFs that contain the term “cloud computing” in their titles. Investors who are too cautious to invest in such a narrow theme could consider other ETFs that hold cloud computing companies as part of a broader basket of disruptive technologies. The ARKW ETF is one such example.
ARKW almost quadrupled in value between March 2020 and February 2021 before falling back in June, which could be one of those rare opportunities to buy on the dip.
Expert Tip on Investing in the Best Cloud ETFs“ Since ETFs are traded in the same way as stocks, you can use the same range of pending order types. For example, a limit order can be placed inside or outside of market hours to buy into an ETF only if you can do so at a maximum price you specify, so you don’t have to worry about buying at an unfavourable price. ”- Shams Ul Zoha
Why Trade the Best Cloud ETFs?
ETFs combine the benefits of mutual funds (e.g., diversification and delegated stock-picking) with the benefits of stocks (e.g., the ability to buy and sell during market hours using various order types).
Cloud computing ETFs allow you to gain exposure to one of the growing themes in the world today.
Frequently Asked Questions
We have suggested several cloud ETFs rather than one because it’s almost always a good idea to diversify by buying several ETFs, even though each ETF provides some diversification.
Like all tradable financial assets, the price of ETFs can go up and down, and past performance is not necessarily a guide to future prospects. However, ETFs are almost always good investments in the sense that a diversified ETF is less risky than putting all your money into a single stock.
Cloud ETFs appeal to investors who want exposure to a growing technology trend without having to identify relevant single stocks or risk money by investing in only one of them.
A share of stock represents part ownership of a single company. An ETF is a basket of such stocks, so a share of an ETF notionally buys you a small slice of several companies.
ETFs are a good investment for beginners because they are easy to understand, easy to trade, and are inherently diversified. Cloud ETFs are not as diversified as index ETFs (for example) so beginners should be more cautious.
Like stocks, the price of an ETF can fall. If you want to sell your stake in an ETF automatically because the price is falling further than the loss you are willing to take, you can use a stop order.