Do you need to “De-FANG” your portfolio of giant US tech stocks?

Wealthbar Ad

Do you need to De-FANG your portfolio or are you so focused on Canada that you’re actually underweight on the big US tech stocks?

My latest MoneySense column looks at the post-Trump surge in tech stocks and the more recent retrenchment in the sector. For the full article, click on the highlighted text here: Do you need to de-FANG your portfolio.

FANG is of course the famous acronym created by Mad Money’s Jim Cramer and stands for Facebook, Amazon, Netflix and Google.

But as the piece goes into in some detail, and per the image above, there are alternative acronyms that include Apple and Microsoft, although not IBM (despite the graphic above).

The question is whether so-called “Couch Potato” type investors who use the MoneySense ETF All-stars already have sufficient technology exposure to participate in the expected long-term growth of technology and particularly Internet giants like Google, Facebook, Amazon and the like. Certainly after last week’s  big announcement that Amazon seeks to acquire Whole Foods, this question is increasingly relevant.

As you’ll see, broad-based ETFs tracking the S&P500 index already have significant tech exposure: roughly a third in these names. Less so for global ETFs exposed to firms outside North America, although these too have healthy exposure to the sector.

Canadian-centric investors woefully underweight technology

And those Canadians who suffer from so-called “home country bias” will find that the broadly diversified Canadian equity ETFs have rather minimal exposure to tech. Big Canadian equity ETFs will have large exposure to the three big domestic sectors of energy, materials and financials but will have very little in local technology stocks.

Those who don’t have US and global equity exposure can do so by either adding to those international ETFs, or add certain Nasdaq/Internet based ETFs (like PowerShares PNQI0 to focus on that sector.

My own conclusion at the end of the article is that Couch Potato investors with proper US and global broad-based ETF exposure probably already have enough tech exposure in the ETFs recommended by the MoneySense ETF All-star panelists, several of whom are quoted in the column.

Canadian-centric investors suffering from home country bias and convinced Tech is the future might want to add some global ETFs or some of the technology-focused ETFs mentioned in the piece: chiefly PNQI or the First Trust Dow Jones Internet Index Fund (FDN), which is 32% concentrated in FANG stocks.



Leave a Reply