Funds provide a way for investors to buy high-performing assets while achieving effective diversification for risk management purposes. My own preference is to buy exchange-traded funds (ETFs) — I prefer the better price transparency, the trading flexibility, and the lower costs that these passive investment vehicles offer compared with actively managed ones.
With this in mind, here are three such funds that stand out for serious consideration.
Demand for gold ETFs like iShares Physical Gold (LSE:SGLN) has exploded in 2025. According to the World Gold Council (WGC), these funds experienced inflows of 397 tonnes over the first half — to put that into context, that was the best semi-annual performance since the depths of the pandemic in 2020.
According to the Council: “fluctuating US trade policy; a weaker US dollar; heightened geopolitical tensions punctuated by regional flare-ups; close attention to the respective paths of inflation and economic growth; and fresh record highs in the gold price” attracted fresh investment inflows.
There’s no guarantee that gold ETFs will keep growing in value. A recovering US dollar alone may put gold prices under strain. But with all these factors still in play, I’m confident of further gains. The iShares Physical Gold product has risen 20.2% since the start of 2025.
Defence stocks are also in high demand as those geopolitical tensions grow. The WisdomTree Europe Defence ETF (LSE:WDEP) has effectively harnessed this trend, rising 21.8% in value since its launch in mid-March.
The fund invests in Europe’s largest defence companies, and includes UK shares BAE Systems and Rolls-Royce from the UK. In total, it holds shares in 24 different contractors, giving it exposure to sub-sectors including aerospace, cyber security, shipbuilding, and munitions.
BAE Systems — currently the ETF’s second-largest holding — underlined the defence sector’s bright outlook this week when it upgraded its own full-year sales and profits forecasts. It now expects revenues to rise 8%-10%, and underlying earnings before interest and tax to rise by 9%-11%.
There’s a risk that supply chain and cost issues may impact the fund’s performance. But on balance, I’m confident it’ll keep rising strongly.
Demand for European shares has also detonated this year. Fears over economic and political conditions in the US — and concerns over the valuation of Wall Street equities — has supercharged interest in listed companies closer to home.
It’s a trend I think could continue, making funds like the HSBC EURO STOXX 50 ETF (LSE:H50E) worth a close look. This particular one’s risen 10.2% in the year to date, outperforming trackers that focus on US and global equities.