5 Funky ETFs for 2025
Adding new wrinkles to a diversified portfolio
Last year I did a detailed breakdown of how I invest. I thought about doing it again this year, but nothing significant has really changed, and I struggle with how meaningful it is given how much personal circumstances dictate one’s money decisions.
As the financial writer Morgan Housel has said, everyone is playing a different game. Everyone has different risk tolerances, liabilities and goals.
In any case, my investments essentially breakdown as follows:
40% - global stocks
30% - bonds
20% - trend following
10% - gold
Meanwhile, the vast majority of new money from my household is going into a target date fund set 20 years into the future.
But I thought it might be of interest to highlight some of my biggest ETF holdings to highlight which funds I think are interesting. I’m not recommending you buy these! I’m not saying these are the best investments right now! It’s simply food for thought. These also happen to be funds that not everyone and their neighbor owns, and I enjoy new ideas, so maybe you’ll find some here.
Again, these are not my predictions for the five best investments of the year. They’re five ETFs I think have some interesting utility in a portfolio.
1. iMPG DBi Managed Futures ETF (DBMF)
Want something a little exotic in the portfolio? DBMF bills itself as a liquid alternative to a hedge fund. Instead of paying “2 and 20” (2% management fee and 20% of profit) to a fancy hedge fund, this ETF will do it for 0.85%. That’s still a high fee for an ETF, so what does it do?
It takes long and short positions in stocks, bonds, oil, gold and currencies, with the aim of catching major trends (up or down) in the market. It rose to prominence in 2022 by being up 21.53%, while S&P 500 was down 18% and the aggregate US bond index was down 13%. How did DBMF do it? Because it can shift gears and go short stocks and bonds.
Now, of course, it’s not going to catch the prevailing trends just right every time, but for adding a layer of diversity to your portfolio and an ability to zig zag against the broader market, it has its benefits.
2. Vanguard U.S. Multifactor ETF (VFMF)
While the market cap weighted US stock market has performed tremendously over the past decade, it’s heavily concentrated in a small number of companies – names like Nvidia, Apple, Amazon, Meta. If those mega cap giants run into serious headwinds, it could mean lower returns going forward. To diversify that portion of my US stock holdings, I use VFMF, which ranks companies by a combination of factors.
The fund eliminates the most volatile stocks, and then equally weights hundreds of large, medium and small companies by “momentum- stocks that exhibit strong recent performance, quality- stocks that exhibit strong fundamentals, and value- stocks with low prices relative to fundamentals.”
The expense ratio is only 0.18%.
3. iShares Gold Micro Trust (IAUM)
I’ve written a fair amount about gold in the past, not because I’m some gold bug, but because it’s performed surprisingly well over the last 20+ years, and tends to be uncorrelated to stocks and bonds.
Last year it returned 26.85%, beating the S&P 500 by 2%. It tends to also do well in a crisis. It could also do nothing for 20 years.
In any case, if you did want to own it, IAUM is about the cheapest way to do so (expense ratio of 0.09%) and it’s highly liquid. I would be cautious owning it in a taxable account, because there’s some funky tax implications with gold. It’s taxed as a collectible and could make tax reporting a headache, which I hate.
4. Janus Henderson AAA CLO ETF (JAAA)
A collateralized loan obligation (CLO) is a simply a basket of loans usually dealt to smaller companies that are below investment grade and wouldn’t otherwise get funding. This may sound risky, but when pooled together they form a AAA-rated product that has “endured through the Global Financial Crisis and the COVID-19 pandemic.” CLOs are not to be confused with collateralized debt obligations (CDOs). CDOs are the things that blew up during the 2008 financial crisis – they’re on the naughty list.
JAAA has a similar duration and credit quality to 1-3 month treasury bills, but it’s giving you roughly 6% compared to 4%. Yes, there is still some risk of default amongst these loans, but historically they’ve held up quite well.
5. Return Stacked Global Stocks and Bonds (RSSB)
This fund is equal parts stocks and bonds, but instead of giving you 50% stocks and 50% bonds, it’s giving you 100% stocks and 100% bonds, hence the “stacked” title. It does this by using leverage, so your return at the end of the day will be stocks plus bonds minus the cost of borrowing.
The way I use this is to create room in the portfolio to add more strategies, while still keeping my exposure to stocks and bonds. So for example, if I wanted to add 10% of gold to a 50% stock and 50% bond portfolio, I could do something like this:
40% - stock ETF
40% - bond ETF
10% - RSSB
10% - IAUM
This would give me a portfolio that’s 50% stocks, 50% bonds and 10% gold. Yes, that’s a 110% total allocation.
Or if I just wanted to hold more cash for emergencies, I could have a portfolio like this:
40% - stock ETF
40% - bond ETF
10% - RSSB
10% - Cash
This would give me a portfolio of 50% stocks and 50% bonds, with 10% in cash set aside to use as needed. It’s essentially borrowing money to buy your stocks and bonds exposure, but the leverage is implicit in the cost of the RSSB ETF.
Or let’s take the ETFs I’ve mentioned in this article and do this:
20% - RSSB
20% - IAUM
20% - DBMF
20% - VFMF
20% - JAAA
Now I’ve got 40% in stocks with multi-factor exposure and an all-star lineup of diversifiers – 20% bonds; 20% gold; 20% managed futures; 20% CLOs. A 120% allocation.
I’m certainly not recommending that particular portfolio, and these ETFs may not be necessary for most people. In fact, they may be just adding unnecessary complexity. However, you can be quite creative with how you diversify your portfolio and potentially take less risk.
Excellent article with great insight!