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Growth investing is particularly difficult right now. Tech and growth stocks have been beaten down in recent months. Meanwhile, the economic outlook for growth isn’t as rosy as it was last year. We’re at the end of a boom.
Nevertheless, there’s still hope for growth in some sectors of the economy. In fact, I think some stocks and exchange-traded funds could double your investment relatively shortly. Here are two growth strategies I’m watching in 2022.
Small-cap ETF
Tiny companies that are beyond the radar of most investors are severely undervalued. After two years of lockdowns, many of these smaller businesses are now bracing for a rebound in demand. Meanwhile, small oil and gas stocks or mining companies don’t attract the same valuations as their larger counterparts.
This creates an opportunity for growth. The iShares S&P/TSX SmallCap Index ETF (TSX:XCS) is a top pick. The fund’s portfolio includes small-cap energy stocks like Baytex alongside tech companies like Celestica. These companies have much more room to grow when investors recognize the opportunity.
In 2022, I expect the economic upswing to create a tailwind for small businesses across the country. This ETF should give investors easy access to that trend as it develops.
In fact, the XCS fund has delivered a 13.3% annual return over the past three years. At that pace, it could turn $1,000 into $2,000 within six years! For growth investors with an appetite for risk, this ETF could be a top pick.
Ethereum Dividend ETF
The fact that cryptocurrencies deliver stunning gains is beyond a doubt. Bitcoin has doubled in value multiple times over the past two years. Ethereum, meanwhile, is up 2,500% since 2020. In other words, you could have put $1,000 into ETH and turned it into $25,000 within two years.
However, there’s a catch. Cryptocurrencies are also prone to severe drawdowns. All major cryptocurrencies have lost double-digit percentages of their market value in recent months. Sometimes, they can lose more than 10% in a single day. This is a volatile asset class.
Fortunately, there’s a new ETF that buffers the volatility a little. The Purpose Ethereum Yield ETF (TSX:ETHY) offers a double-digit dividend yield that offsets some of the downside risk. It generates this yield by writing covered call options on a portion of its Ether holdings. At the moment, ETHY offers a 17.4% dividend yield. That’s nearly half the recent decline in Ethereum’s value, which makes this ETF a safer bet than the underlying digital asset.
Put simply, this ETF could double your money in a matter of months during a boom. However, in a bust it can limit your losses with the premiums on covered calls. For aggressive growth investors, this is a top pick in 2022.
Bottom line
Hyper-growth opportunities are scarce. Investors seem too pessimistic about tech and growth stocks right now. But there are opportunities in some sectors. I believe small-cap businesses and cryptocurrencies are an ideal target for 2022. Keep an eye on these sectors.
