This is neither bad nor good, it just is. If for some reason you like lithium but hate SQM then you probably need to find another way in besides the ETF. It is important to remember the ETF is simply one form of access to whatever narrow exposure you are interested in adding. It will have pluses and minuses to consider before buying.
Long time readers may recall we use the iShares DJ Tech ETF (IYW) for most of our technology sector exposure. IYW has an 18.5% weight to Apple (AAPL) which is large and makes keeping some sort of tabs on the name prudent. The extent to which one keeps tabs is up to the end user and fortunately in this case you don't really need to go looking for information on Apple. CNBC talks about multiple times a day and there is plenty of coverage of the name on just about any market-related website you are likely to visit.
Tech makes up just under 20% of the SPX. Someone with an equal weight position in IYW obviously has a 3.7% weight in AAPL (actually the weight of AAPL in iShares S&P 500 (IVV) is 3.74% but you get the idea). To my way of thinking this is no different than owning AAPL directly in conjunction with some broad tech ETF that somehow did not have AAPL in it.
We target most individual equity positions at 2% or 3% of the equity portfolio so the equalweight in IYW (we do not target 20% in IYW) results in a pretty large position in AAPL--at least from my perspective and I would say that even someone who does not use any individual stock does need to stay on top of the stock. Hopefully it is clear that if AAPL somehow cut in half due to some bottom up reason (not a prediction, but instead an observation of risk) then obviously the hit to IYW would be noticeable.Again this is neither generically good or generically bad it is simply a consideration for using a narrow ETF and obviously I don't view it as a problem as we use the fund for many accounts.
The picture is from when we offloaded Engine 86 when it was delivered.
5 comments:
I'm surprised that IYW, with more holdings, actually has a slighly larger allocation to Apple than does the QQQ. I would have guessed just the opposite.
Off topic, kind of.
I entered my graveyard of forgotten miscellaneous crap and hauled out some stuff written by Harry Browne and the Permanent Portfolio.
The quest was to find out of Browne recommended Swiss Franc investtments in a permanent portfolio. I said yea, you, Roger, thought not.
Turns out we are both correct. In his early Permanent Portfolio pronouncements, Browne did argue to include a percentage of assets in SF investments. Later in his life, Browne did not include SF investments, prefering a larger percentage in gold (precious metals).
Brownes results with his PP concept are nothing spectacular. I believe that his approach to safety and anticipating the unexpected have saved many otherwise fast and loose investors (and women, perhaps) many sheckles over the years. The concept of a Permamnent Portfolio and Speculative Portfolio is a great way to work a wealth management scheme, along with appropriate tax avoidance.
T
Pardon my spelling and grammar, I was typing while puffing away on a favorite Cuban (Cohiba Esplendido).
T
How about DOW 15,000 seems to be a hot topic...
6:28,
I wrote about that yesterday.
Post a Comment