1 No-Brainer Cloud Computing ETF to Buy Right Now for Under $200

To build wealth over time, most investors would do well to park many, if not all, of their long-term assets in the stock market as a whole — perhaps through a simple low fee. S&P 500 index fund. Such index funds offer solid long-term growth with relatively low risk. (The S&P 500 has averaged annual gains of nearly 10% over long periods — which is a pretty strong growth rate.)

But if you’re looking to squeeze in a little profit by taking advantage of the fast-growing parts of the economy, you might want to look for an exchange-traded fund (ETF) that focuses on a specific sector. (An ETF is a mutual fund-like investment that trades like a stock.)

Image source: Getty Images.

Here’s a particularly promising focused ETF: The Fidelity Cloud Computing ETF (FCLD 0.04%)which recently traded at nearly $22 per share. A $200 investment would get you a full nine shares, or maybe a little more if your broker offers fractional investments.

Why cloud computing?

First, understand why cloud computing is worth pursuing. It’s the technology that allows us to access and use software and data that is stored “in the cloud” — which, in reality, is a lot of data centers. (You could also invest in data centers, by the way.)

It is a rapidly growing technology niche. According to Mordor Intelligence, the market was worth an estimated $680 billion this year and is expected to grow to $1.44 trillion by 2029, just five years from now. That’s an average annual gain of 16.4%.

Meet the Fidelity Cloud Computing ETF

You might look for some cloud computing companies and then figure out who the big winners will be years from now. But if you’re not that cloud computing savvy, you could opt for a cloud computing-focused ETF that will quickly and easily introduce you to a number of such companies.

Here, for example, are the top 10 recent holdings — out of about 50 — of the Fidelity Cloud Computing ETF:

Source: Morningstar.com. Chart by author.

You will notice that some of the companies are more immersed in cloud operations than others. Microsoft, for example, includes not only cloud computing (via its Azure platform), but also the Windows operating system, the Office productivity software suite, the Xbox gaming platform, the LinkedIn network, and more—and many of these incorporate cloud technology .

How has the Fidelity Cloud Computing ETF performed? There is no three-year, five-year or 10-year average annual return to report, as the fund was only launched on October 5, 2021. The fund’s first full year of performance — 2022 — was not impressive, as it lost 41, 1% But the next year he won 52.4%.

Clearly, this fund can have a volatile life. However, as long as the gains sufficiently outweigh the losses, it can reward shareholders well.

How could your money grow in this ETF?

Here’s some speculation — because we can’t know how the cloud computing ETF — let alone the S&P 500 — will perform from year to year. Remember that over many decades, the S&P 500 has averaged annual returns of nearly 10%, although it may deliver slightly more or less over your investment period. The cloud computing ETF could also average 10% or 30%. Nobody knows.

Let’s imagine it averages 15% annually. Here’s how your money could grow at these growth rates if you put away $7,000 annually:

Calculations and table by author.

See? That’s pretty impressive — though, again, not guaranteed. The best move, if you’re interested in chasing such returns, might be to dedicate only a portion of your portfolio to one or more niche markets that you’re very bullish on. Then keep track of those niches to make sure they’re still growing.