Building Tomorrow's Grid: Why GRID ETF Could Electrify Your Portfolio⚡

In partnership with

Hello, fellow ETF enthusiasts! In our increasingly electrified world, where artificial intelligence data centres operate with unprecedented energy demands and electric vehicles fill our highways, one critical piece of infrastructure often goes unnoticed: the electrical grid itself. Today, we are focusing on the First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund $GRID ( ▼ 0.6% ) , a specialised ETF that invests in companies working to modernise the electricity flow from generation to consumption.

Expert investment picks that have returned 200%+

AIR Insiders get picks from expert investors and industry leaders sent straight to their inbox every week. Picks like:

Jason Calacanis recommending Uber at $25/share (200%+ return)

Anthony Scaramucci recommending Bitcoin at $29,863 (200%+ return)

Sim Desai recommending OpenAI at an $86 billion market cap (200%+ return)

Looking to invest in real estate, private credit, pre-IPO ventures or crypto? Just sign up for our 2-week free trial so you can experience all the benefits of being an AIR Insider.

Sign Up For Free

What is GRID?

GRID seeks to track the Nasdaq Clean Edge Smart Grid Infrastructure Index, targeting companies engaged in the 'smart grid' movement, which aims to upgrade America's electricity grid with 21st-century technologies. With over $2.5 billion in assets under management and 107 total holdings, this isn't a niche play—it's a substantial bet on the infrastructure backbone of our digital economy.

The case for GRID rests on a simple but powerful premise: our electrical grid is undergoing its most significant transformation since Edison's time. Companies in this fund include those engaged in maintaining and operating the electric grid, electric meters and devices, networks, energy storage and management, and enabling software used by the smart grid infrastructure sector.

To earn inclusion in the underlying index, companies must meet rigorous criteria. The index employs a modified market capitalisation weighting method, with securities categorised as either Pure Play (weighted at 80%) or Diversified (weighted at 20%).

Here's why better grid management and infrastructure remain the key to our energy future, even as renewable sources proliferate:

• ⚖️Grid stability becomes critical as intermittent renewable energy sources, such as wind and solar, require sophisticated balancing systems to maintain reliable power delivery.

• 📊Smart meters and sensors enable real-time demand response, reducing waste and preventing blackouts during peak consumption periods.

• 🧠Energy storage integration requires advanced grid management software to optimise when to store excess renewable energy and when to release it back to the grid.

• 🔌Electric vehicle charging infrastructure must be intelligently managed to prevent grid overload, especially as EV adoption accelerates.

• 🛡️Cybersecurity and resilience become paramount as our increasingly digital grid faces new threats and extreme weather events.

The technologies and companies GRID provides exposure to are cutting-edge in the energy space and are leaving traditional fossil fuels producers behind, positioning the fund at the intersection of multiple powerful trends.

Investment Strategy📊

Incorporating GRID into an ETF portfolio requires understanding its role as both an infrastructure play and a technology investment. Here are several strategic approaches ETF investors might consider:

• 🛰️Core-Satellite Strategy: Use GRID as a satellite holding (3-7% allocation) within a broader infrastructure or technology portfolio. Its specialised focus complements broader infrastructure ETFs, such as the Global X U.S. Infrastructure Development ETF (PAVE) or technology-focused holdings.

• 🎯Thematic Concentration: For investors bullish on the energy transition, GRID pairs naturally with clean energy ETFs, creating a comprehensive "energy transformation" allocation that covers both generation (solar, wind) and transmission/distribution infrastructure.

• 🧱Defensive Growth Positioning: Infrastructure has continuously delivered investors defensive performance throughout market cycles, making GRID potentially attractive during uncertain economic periods while still capturing growth from modernisation trends.

• 🌏Geographic Diversification: While GRID focuses on companies serving North American markets, its holdings include National Grid PLC, ABB Ltd, Schneider Electric SE, Johnson Controls International PLC and Eaton Corp PLC, providing exposure to global infrastructure leaders.

• 🔁Rebalancing Considerations: Given GRID's cyclical nature and sensitivity to interest rates (infrastructure investments are capital-intensive), quarterly rebalancing may help capture volatility while maintaining target allocations.

GRID at a glance

ETF Issuer: First Trust

Inception: 2009-11-06

Asset Class: Equity

Underlying Index: Nasdaq Clean Edge Smart Grid Infrastructure Index

Geographical Focus: Global

Expense Ratio: 0.56% (as of last data point)

Dividend Yield: 1.08% (as of last data point)

Distribution Frequency: Quarterly

Historical Performance

GRID's performance story reflects both the promise and challenges of infrastructure investing. Since the fund's inception, the average annual return has been 11.53%, demonstrating the long-term growth potential of investments in smart grids.

The fund has benefited from several tailwinds over its 15+ year history, including federal infrastructure spending, the renewable energy buildout, and increasing focus on grid resilience. Looking at sector allocation, recent data indicate that the ETF has a hybrid nature, combining modern grid infrastructure—part traditional industrial equipment, part cutting-edge technology.

ETF Radar View

The radar chart below shows the general characteristics of the ETF:

Top 3 Reasons to Invest

1. Market-Leading Companies with Exceptional Growthes: GRID provides direct exposure to the global leaders driving smart grid transformation. The fund's top holdings include industry giants that are not only participating in the smart grid revolution but also defining it. These established market leaders possess the technological expertise, global reach, and financial resources to capture the lion's share of infrastructure modernisation contracts. These companies are positioned to deliver sustained revenue growth for years to come.

2. Artificial Intelligence Demand Surge: The AI revolution is creating unprecedented electricity demand. Data centres supporting AI workloads require not only more power but also smarter and more reliable power delivery systems. GRID's holdings are directly positioned to benefit from this massive infrastructure buildout.

3. Electric Vehicle Integration Opportunity: As EV adoption accelerates, the grid must become "smarter" to handle millions of vehicles charging simultaneously. Smart grids utilise electric vehicle (EV) charging infrastructure to manage grid load more effectively, with startups developing smart inverters and energy storage systems specifically designed for grid applications.

Top 3 Reasons Not to Invest

1. Regulatory and Political Risk: Grid modernisation is heavily dependent on government policy and regulation. Changes in political priorities, environmental regulations, or infrastructure spending could materially impact the sector's growth trajectory.

2. Technology Disruption Risk: While GRID invests in current smart grid leaders, rapid technological change could make some holdings obsolete. Breakthrough innovations in energy storage, wireless power transmission, or distributed generation could disrupt traditional grid infrastructure models.

3. Concentration Risk: With 107 total holdings and a modified market-cap weighting methodology, GRID may be more concentrated in larger players than a broader infrastructure fund. Poor performance from major holdings could disproportionately impact returns, and the specialised focus limits diversification benefits.

⚡GRID: Powering the Future

GRID represents a compelling way to invest in the modernisation of our electrical infrastructure. With the energy sector facing a massive investment gap by 2033 and smart grid technologies becoming critical for managing the integration of renewable energy and the adoption of electric vehicles, GRID positions investors at the centre of a multi-decade transformation.

The fund's 15+ year track record, substantial asset base, and exposure to both established infrastructure leaders and emerging technologies make it worthy of consideration for investors seeking exposure to the energy transition. However, like all specialised ETFs, GRID requires careful position sizing and an understanding of its inherent risks.

Ready to explore specialised ETF opportunities and connect with fellow investors? Join the ETF UNO community for exclusive insights, portfolio strategies, and discussions about the funds shaping tomorrow's investment landscape. Together, we'll uncover unique opportunities.

DISCLAIMER: This article is for informational purposes only and should not be considered as investment advice. Always conduct your own research and consult with a financial advisor before making investment decisions.