Best Food ETFs Right Now

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Contributor, Benzinga
October 28, 2020

Want to jump straight to the best ETF broker? Check out Interactive Brokers.

The consumer staples sector is made up of companies that provide daily goods and services like food and clothing. Due to COVID-19, food and beverage companies face reduced consumption and disrupted supply chains. However, at-home consumption has increased significantly along with delivery services. Many investors wonder whether this shift is an indication of long-term changes in customer behavior.

Food ETFs Biggest Gainers and Losers

Food industry exchange-traded funds (ETFs) are major players in the consumer staples sector. Many subsectors within the industry including coffee, livestock, U.S. fast-food chains — with global operations and socially responsible funds focused on environmental and social issues. Check out the live updates below to see which food ETFs are gainers and losers.

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Premarket Food ETFs

ETFs can be bought and sold on the market all day. As a result, ETF share prices fluctuate throughout the day. One advantage of investing in an ETF versus a mutual fund is that you can take part in premarket trading, which takes place before the markets open. While premarket trading can allow you to get a head start on the day and news cycle, the amount of shares traded on the market at that time is lower than usual. This limited volume can affect a share’s showing, making it look stronger or weaker than it is before the market opens and real volume trading comes into play. 

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Aftermarket Food ETFs

Along with premarket access, investing in ETFs means that you can also take advantage of aftermarket or postmarket trading. This is the period after the markets close when investors can buy or sell securities outside of regular trading hours. While aftermarket trading poses the same limited volume risks as premarket trading, aftermarket trading allows you to react to breaking news or new information before the next day’s market opens.

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Why Invest in Food ETFs?

Check out a few reasons why you might want to invest in food ETFs.

Low Fees

ETFs are passively managed and have significantly lower expense ratios compared to actively managed funds. You save on management costs such as management fees, shareholder accounting expenses, service fees and load fees. Since there is only 1 transaction per ETF trade, you will avoid paying multiple commission fees that can occur when trading multiple stocks.

High Liquidity

ETFs are simple to buy and extremely liquid. ETFs trade frequently throughout the day as well as during pre- and postmarket hours. ETF share prices are continuously updated and ETFs can be sold short or on margin, making them easy to acquire and get rid of. As a result, you can jump in and out of ETF trades as frequently as you want.

Tax Advantages

ETFs offer investors numerous tax advantages. Since ETFs are passively managed, their underlying holdings are traded less frequently. As a result, investors incur lower capital gains taxes and only pay capital gains taxes when they sell their entire ETF share. Since you can choose when to sell your personal share, you control when you want to impose the capital gains tax and can wait to do so at an advantageous time.

Top 3 Food ETF(s) by AUM

Food ETFs can encompass a range of companies within the food industry. Below are 3 food ETFs with proven growth records and diverse assets under management (AUM) across the food industry. AUM refers to the market value of a company’s assets that also serves as a useful metric to measure a company’s success over time. The higher a company’s AUM grows over time, the more successful the company.

1. E-TRACS USB Bloomberg Commodity (FUD)

An exchange-traded note, the UBS ETRACS CMCI Food Total Return tracks the price and performance yield of the UBS Bloomberg CMCI Food Total Return index. The index measures returns from a diversified basket of agriculture and livestock futures contracts. It is made up 11 agriculture futures contracts and 2 livestock futures contracts included in the CMCI.

2. First Trust Nasdaq Food & Beverage ETF (FTXG)

FTXG’s portfolio concentrates on the food and beverage industry. In fact, 5 of FTXG’s 29 holdings make up around 40% of its fund. That said, FTXG’s holdings include some of the biggest players in the processed food and beverage industry from PepsiCo and Mondelez International (MDLZ) to alcohol companies such as Constellation Brands (STZ).

3. PowerShares Dynamic Food & Beverage Portfolio (PBJ)

PBJ is one of the oldest food ETFs around and offers investors a balanced fund. PBJ’s top 5 holdings make up around 25% of the fund and include big-name food products distributor Sysco Corp. (SYY) and Kraft Heinz Co (KHC). PBJ’s portfolio also consists of top-name consumer discretionary stocks including Starbucks (SBUX), McDonalds (MCD) and Domino’s Pizza (DPZ).

Best Online Brokers for Food ETFs

Food ETFs are a great way to diversify a portfolio or hedge portfolio risks. Below are Benzinga’s picks of investment firms that can help you navigate the ins and outs of the food industry and ETF trading.

The brokers below also offer options for trading penny stocks. Check out this Benzinga article to learn more about how penny stocks can enhance your investment portfolio.

Webull
Best For
  • Intermediate Traders and Investors
securely through Webull's website

1. Webull

Webull provides its Hot ETFs lists and ETF screeners so you can hone in on the exact ETFs you're looking for. You can also tap into comprehensive and real-time ETF quotes and market news. Use Nasdaq TotalView to help you understand the market trends corresponding to ETFs in real time. Webull also helps you out with its ETF screener to find the ETFs you want for your portfolio.

Webull's new Desktop Trading Platform offers a fully customizable trading terminal (with over 45 widget boxes) to help you trade.

Right now, you can also get 3 free stocks! For a limited time, Webull offers a stock valued between $2.50 and $250 when you open a Webull brokerage account. Get 2 free stocks valued between $8 and $1,600 when you make an initial deposit of $100 or more.

Open an account with Webull to get your 3 free stocks today.

TradeStation – Online Broker – ONL-TRA-INVE-2737
Best For
  • Futures Trading
securely through TradeStation – Online Broker – ONL-TRA-INVE-2737's website

2. TradeStation

TradeStation’s free desktop platform is filled with stock trading tools and is widely considered one of the most advanced trading platforms in the industry.

TradeStation offers investors access to a wide range of tradable securities and cryptocurrencies, and is best suited for active and advanced traders wanting to trade stocks, options, futures and cryptocurrency. TradeStation’s $0 minimum investment and trading costs are also appealing to regular investors.

Firstrade
Best For
  • Mobile Investing
securely through Firstrade's website

3. Firstrade

Firstrade’s $0 trading costs and $0 per-contract fees for options trades are appealing to both experienced investors and beginners.

Firstrade also boasts 3 trading platforms and a mobile app, allowing for easy access to up-to-date information. Additionally, all investors with long-term investments can take advantage of commission-free trades for all mutual funds.

TD Ameritrade
Best For
  • Options Trading
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4. TD Ameritrade

TD Ameritrade is known for its high-quality trading platforms, offering free research, data and portfolio guidance for its customers. Also, with almost 300 branches dedicated to in-person customer support, TD Ameritrade is dedicated to customer service.

TD Ameritrade has a $0 minimum investment policy and charges $0 commissions on stock, options, ETF trades and a selection of mutual funds.

Food for Thought

ETFs are a great way to spice up your investments and balance your portfolio. These funds offer numerous advantages for investors and food ETFs in particular have proven to be stable investments with strong performance over time.

Like any ETF, food ETFs are not risk-free. It’s wise to talk with a broker about ways to mitigate or manage risks. Once you’ve done your research, dig in and enjoy the benefits!