As smart watches start flooding the market, FONE may be a good call.
The nascent smart watch industry might finally be coming to fruition: AT&T recently announced it will be the first U.S. carrier to offer LG's new SmartWatch.
I took a dive into some ETF portfolios to find which ETF might best harness the returns from the smart watch industry. Amusingly, although not shocking, the best ETF for smart watches is the smart phone ETF.
The First Trust Nasdaq CEA Smartphone ETF (FONE | D-12) holds big positions in most of the lead players in the smart watch space, including LG Electronics, Google, Apple, Samsung and Motorola.
That said, investors should be sure they're convinced before jumping into FONE, as the ETF has its drawbacks. For one, it charges a steep management fee (0.70 percent). Second, it is dangerously illiquid. Lastly, it uses a funky tiered weighting scheme to construct its portfolio. That said, it's also the only ETF specifically targeting smartphones (and smart watches, albeit accidentally).