Ideas for Fun fund in Tech

[djbabasil]

I would like your opinion concerning my fun fund in tech.

First: My core portfolio is very simple, low cost, diversified and i am happy with it: VT & Viac (50 World, 10 EM, 25 Spi ex, 12 Smi) as equities, PK considered as security. I do not want to change it. But it is boring and i want to put some spices: fun fund (ff)

Rules:

• ff is not part of my portfolio: no rebalancing with VT
• yearly allocation: max viac, 90% vt, 10% ff
• ff is for fun, adrenaline, beating the market : that’s ok if it crashes!
• ff should stay simple: no investment in stuff i do not understand (at all), buy & hold, easy to manage (2-4x/y), not time consuming (no stock picking analyst)
• in my ff every position is equally allocated (same%)

So for now i came with 1 fun sector idea: tech. Found 3 etfs that are interesting: qqq, igm, fivg.

I am not sure which to choose btw qqq, igm, fivg

Qqq
https://www.morningstar.com/etfs/xnas/qqq/portfolio

• cheapest (ter 0.2), has them all (big techs)

• very heavy on FAAMG, nasdaq selection criteria (no sector)

Igm
https://www.morningstar.com/etfs/arcx/igm/portfolio

• has them all (big techs) and more (visa, mastercard etc), bigs guns are not toooo heavy

• highest ter (0.5)

Fivg
https://www.morningstar.com/etfs/arcx/fivg/quote

• has mid caps, has international caps, ter ok (0.3), lowest overlap with VT

• Selection criteria: are they 5G and is 5G gonna overperform global tech?

I hesitate btw igm (weight well diversified, but expensive and no ex-usa) and fivg (weight well diversified, not to expensive, but are the selection criteria valid?).

As many here work in IT: which one do you think has the most potential? Or other ideas?

[sammiz]

I do not understand to go broad based Tech Etf’s and buy and hold it as “fun fund”. These funds has more or less the same content with current US market- will be highly correlated to S&P / Nasdaq. This means very high overlap with your main portfolio. The performance difference still might exist, but will be marginal and partly eaten by TER & Extra complexity.

Generally people use fun fund to itch their stock picking, frequent trading or uncorrelated market ideas (metals, bitcoins, factors). Perhaps you do not need a fun fund but you are looking for sector weighting your portfolio? Do not get me wrong, there is nothing wrong with this, or your ETF choices. I just wanted recommend to think once again why you want to go this way- and if this solution will cover the need? If you are making a too rational choice on this, you are aware the most rational choice would be VT.

[glina]

Just do VGT + EMQQ.

QQQ is much narrower and more expensive than VGT
IGM, FIVG too narrow exposure and expensive.

[Neville]

What about something that follows the MSCI World Information Technology index?

[San_Francisco]

@glina

Just do VGT + EMQQ.

I seond this.

@djbabasil

• very heavy on FAAMG, nasdaq selection criteria (no sector)

NASDAQ-100 does selectively exclude financials though.

@djbabasil

IGM
has them all (big techs) and more (visa, mastercard etc), bigs guns are not toooo heavy

Doesn’t seem all that different from VGT, does it? I’m not one to advocate for (over)optimising on TER, but I’d probably prefer VGT here.

@djbabasil

Selection criteria: are they 5G and is 5G gonna overperform global tech?

5G is a buzzword. It is basic infrastructure - like electricity and phone networks. Hard to command price premium over competitors.

@djbabasil

no investment in stuff i do not understand (at all)

When was the last time you consciously used a product from Xilinx, Keysight or American Tower Corporation? And what do you know about them?

(5G) wireless communications technology is a sector of largely B2B sales.
And a very “narrow” selector to use for investment choice.

As such, ask yourself if you understand the sector’s specific economics - supply, demand, growth, costs, competitiveness, pricing power - reasonabyl well. And also regulatory and political aspects, I might add (US/Huawei comes to mind).

I don’t think I do.

[dbu]

@glina

VGT

Keep in mind that VGT doesn’t contain:
Amazon, Facebook, Google (Alphabet), Netflix… What you would maybe expect from a “tech fund”.

You could essentially go with VUG (growth) and get coverage of what you are probably aiming to cover (big “tech”) - but, are you betting on growth factor then?
Or IGM, which is a bit less concentrated on MSFT and AAPL, but covers others + has higher TER.

Here a sheet where I did some comparisons a while ago:

ETF comparisons

[glina]

@dbu

Amazon, Facebook, Google (Alphabet), Netflix… What you would maybe expect from a “tech fund”.

Totally happy with that! This makes more room for some of the fast growing small and mid caps. Plenty enough of FAANG weight in VTI.

[djbabasil]

Thank you all for your comments!

@sammiz

Perhaps you do not need a fun fund but you are looking for sector weighting your portfolio?

I am talking here about a fun fund: <10% (probably more like 5%) of my portfolio, so no effect (pos oder neg) on it. I do NOT want to to tilt it. It is just for fun: high risk (crush VT!), simple (1 fund per sector, maybe 1 stock here and there).

@sammiz

These funds has more or less the same content with current US market- will be highly correlated to S&P / Nasdaq.

I see your point, but it depends which fund.

@glina

Just do VGT + EMQQ.

QQQ is much narrower and more expensive than VGT
IGM, FIVG too narrow exposure and expensive.

All good points, but: i would prefer 1 fund (i’m lazy here); VGT does not hold Telecoms

@Neville

MSCI World Information Technology

Top 10 holdings = VGT, no other advantages.

@San_Francisco

NASDAQ-100 does selectively exclude financials

Yes, that’s my main problem mit QQQ: it follows NASDAQ-100 (top 100 from NASDAQ) instead of a sector (or sectors). According to what i read on investopedia: " Whether a stock trades on the NASDAQ or the NYSE is not necessarily a critical factor for investors when they are deciding on stocks to invest in. However, because both exchanges are perceived differently, the decision to list on a particular exchange is an important one for many companies. A company’s decision to list on a particular exchange is also affected by the listing costs and requirements set by each exchange. The entry fee a company can expect to pay on the NYSE is up to $500,000 while on the NASDAQ, it is only $50,000 to $75,000. Yearly listing fees are also a big factor: on the NYSE, they based on the number of shares of a listed security, and are capped at $500,000, while the NASDAQ fees come in at around $27,500. So we can understand why the growth-type stocks (companies with less initial capital) would be found on the NASDAQ exchange.". So Nasdaq criteria = stocks with low initial capital; I don’t know if QQQ performed so well bc of luck or bc this criteria is a great one.

@San_Francisco

5G is a buzzword.

Thanks

@San_Francisco

ask yourself if you understand the sector’s specific economics

No i do not understand it, no doubt. That’s not what i meant. I do not want to invest in products i don’t understand (margins, put options etc).

@dbu

Keep in mind that VGT doesn’t contain

Yes, Telecom is not included, do not like that.

@dbu

but, are you betting on growth factor then

Oh boy, if factor: SCV.

@dbu

Or IGM, which is a bit less concentrated

Yes, it is my favorite.

@glina

This makes more room for some of the fast growing small and mid caps

VGT has 1% SC and 11% MC (according to M*).

So i am still unsure, choose:

• QQQ: bc selection criteria is not just luck, but i great one: small caps start in NASDAQ and NASDAQ-100 holds only the one performing bests… am i dreaming here ?
• IGM: TER (relative) high but hold Tech + Telcom and FAANG are not tooo heavy.

Happy for feedbacks (mostly concerning QQQ)!

EDIT: typos.

[San_Francisco]

@djbabasil

No i do not understand it, no doubt. That’s not what i meant. I do not want to invest in products i don’t understand (margins, put options etc).

No need to explain, that’s what I assumed in the first place

But my question still stands:
Are you going to invest using vehicles (funds, ETFs) you do understand
to squarely invest in markets you don’t?

[djbabasil]

@San_Francisco

my question still stands:

Yes. Cause i know nothing, but I search for fun (in investing…).

[djbabasil]

So I chose in my first 2 etfs for my fun fund:

• VIOV : scv so reversion to the mean , very small allocation in VT

• QQQ: well reversion to the mean would hurt this lcg…but i believe QQQ benefits from a selection bias of the nasdaq. Maybe that is why QQQ outperformed MGK?
  

  
  
  Anyway, this is my fun fund, so no pos /neg effect on my portfolio.

[covfefe]

If you haven’t already, have a look at ARKK innovation ETF holdings. It’s a massive FOMO YOLO disrupt the world fund with interesting holdings. Don’t get put off by the over excited fund manager

[djbabasil]

Thanks. Tesla 10% of the fund and price target of 5000 usd…that is something for @Bojack

It is tilted small caps, love that!

[covfefe]

They have sector funds too. I like to listen and read some of their material beyond Tesla and bitcoin.

[wapiti]

I think it’s good to limit allocation (like you said), but you also need to take into account that with only 10% the FF needs to have very strong performances to have a significant impact in your portfolio. I think it makes more sense to invest in funds like SCV, but with a high allocation like 25%.
Another option would be leveraged ETFs, like UPRO.

On a general note, the last ETFs on the SIX introduced seems more to be marketing funds using buzz words than real investment strategies. Smaller Fund management companies know they can’t compete against Blackrock or Vanguard on standard indexes like MSCI and S&P500, so they launch thematic ETFs with heavy fees.

[glina]

EMQQ is awesome though

[covfefe]

@wapiti

I think it’s good to limit allocation (like you said), but you also need to take into account that with only 10% the FF needs to have very strong performances to have a significant impact in your portfolio. I think it makes more sense to invest in funds like SCV, but with a high allocation like 25%.

I agree on this one (I have 25+% in SCV). A fun fund (or stocks) of 5% could serve a purpose of anything between intellectual curiosity, adrenaline rush, and pure gambling. But it can neither make or break your returns. For real departure from VT/VT-like broad portfolio, it’s SCV or a sizable bet on EM value ( heavily beaten down in last decade) or conversely EM tech (EMQQ/KWEB types).

[djbabasil]

So, i will take ARKK (instead of QQQ) and VIOV equally weighted in my fun fund. Lots of small caps . Let the roller coaster start!

[covfefe]

wild ride almost guaranteed

[djbabasil]

Starting tomorrow