Hi,
What’s everyone’s opinions on Nasdaq 100 (CNX1) vs S&P 500 Information Technology (IITU)?
One question I have is I know S&P I.T (IITU) trades in GBP, whereas Nasdaq trades in dollars. But does that make a difference if you pay no fx fees on invest engine?
I’m planning long term investment, 20-30 years, so I can ride out the waves of volatility for a while yet.
Hi @BraveDave23, I get exposure to tech through a much cheaper global ETF. Tech makes up a large percentage of the global market, plus you get all the diversification across all the sectors and all/most countries.
Both funds are denominated in USD, so that won’t make a difference, whichever one you choose. IE don’t charge an FX fee because these funds trade on the LSE, but the fund manager is then buying US stocks in USD
Thanks @Carl .
I’m new to the platform and to ETF’s so I appreciate you explaining how the funds are traded. My ISA has been held for years with St. James Place but I have reached the end of my tether with their poor performance and high fees so am taking control of my own investments. I am getting financial advice from a friend who has a lot of experience.
I’m planning to also have Ishares S&P 500 and Ishares Core MSCI World in my portfolio so I will get diversification there. But the Nasdaq 100 has significantly outperformed both over the past 30+ years. I plan to leave my investments for 20-30 years so I can deal with the extra volatility but I have confidence that it will continue to outperform in the long run.
Just really after opinions on Nasdaq 100 vs S&P 500 I.T.
I personally don’t bother with the S&P 500 because I have a global fund which invests in large and mid cap stocks in the developed world.
The companies in the S&P 500 will be in the global fund so I think you’re just doubling up. Same reason I don’t invest in specific sectors such as technology.
I diversify further with different asset classes such as size (small cap) and value stocks but this is what I believe in, so I’ll stick it out when the market turns against me. It’s the same for technology growth stocks. If this is what you believe in, fill your boots.
I would say, you need to develop your own theories. Advice is aplenty. I’ve read lots of books which have helped me a lot.
I should diversify more. I’ve spent countless hours looking at small cap, emerging market etc ETFs, only to compare their performance over time to the S&P 500 and MSCI world etc and come to the conclusion that if I’m in it for the long haul and willing to deal with the volatility, the long term growth will undoubtedly be better without them.
You’re right that I’d be doubling up with both S&P and MSCI. All the advice says that when choosing etf’s I should compare their correlation over time to check they’re actually different. But as 70% of the world stock market is in the U.S. they all share the same correlation, some just more volatile.
This graph compares S&P, MSCi, Nasdaq, FTSE all world and FTSE developed world over just over 3 years, but it’s the same no matter how far you look back, they all have the same pattern.
I use EQQQ and EQGB depending where the quid’s sitting in relation to $
I’d go with EQQQ over CNX1 if it was available on InvestEngine, but it seems only the hedged EQGB is there from Invesco.
EQQQ is available: Invesco Nasdaq 100 (EQQQ) | InvestEngine
Unfortunately it provides income rather than accumulation, which wouldn’t be my preference. But I have shares in it anyway. Perhaps I should switch to CNX1, which is lower TER and accumulates.
Thinking about the three options (EQQQ, CNX1, and IITU), EQQQ and CNX1 seem to both mirror the Nasdaq 100 very closely. I’d recommend CNX1 because of the lower TER and accumulation, although it’s also worth considering liquidity (I don’t personally, because I haven’t worked out how to do it easily). IITU is different, as you’d expect for something that tracks a different index. Nasdaq is 11% Apple, 10.5% Microsoft, 5.7% Amazon, 4.6% Nvidia, 3.9% Meta, roughly 3% each for Broadcom, Alphabet, and Tesla, and 2% Adobe. S&P IT is 25.2% Apple, 19.7% Microsoft, 12% Nvidia, Broadcom 4%, Adobe 3%. So you’re getting much more exposure to Apple, Microsoft, and Nvidia, and less to Amazon, Meta, Alphabet, and Tesla. Now personally, I think diversification is the prudent thing and would therefore choose the Nasdaq index, but if you think Apple, Microsoft and Nvidia are likely to outperform Amazon, Meta, Alphabet and Tesla then S&P IT might make more sense for you.
I’d be careful about looking at the past performance of US indexes and assuming the next 30 years will look like the last 30 years. Emerging Markets are likely to grow as a share of global capital. I’d also be very cautious about overinvesting in tech - you might recall that about a year ago the big tech companies all laid off large portions of their workforce, and people who needed liquidity at that time were left holding the bag. There are good reasons to be sceptical about whether the boom that has lifted those 5-7 Goliaths over the last fifteen years (or more) will hold in a tighter regulatory market, the end of low interest rates, market saturation, innovations that might fail, the threats to American democracy, etc.
For me regional diversification is king. I’m quite exposed to India, Brazil, Mexico, Indonesia, and South Africa. Yes there are disasters that could plausibly affect all of them and the US and Europe and the Developed Asia-Pacific, but the odds of those are lower than a disaster affecting any one country or region.
Continuing the discussion from Nasdaq 100 vs S&P Information Technology:
Hi,
There does seem a lot of duplication in the overall proposal: S&P IT/NDX + US500 + Dev-World - they all have lots of US & Tech, mainly the big US 7.
A big tilt to: Tech; the US; the future is like the past; and EM won’t shine - nothing wrong with that if it is your aim.
I just buy Global these days (SSAC, cheapest Acc I found). The investing world in aggregate is putting 60% in US and 1/3 in Tech, so I am doing the same. I might lose money, but I don’t stress I’ve tilted the wrong way.
Also, S&P-IT is 100% Tech and NDX is 50% so they are not the same. You can check the fund portfolios on Morningstar.
Dropping high-cost SJP for IE was certainly a smart 1st step.
Thank you @TBrailles I hadn’t realised EQQQ was income rather than accumulating, that will be why it didn’t show in the search results on invest engine as I had filtered only accumulating in my search.
And thank you for explaining the differences of CNX1 and IITU. I will go with CNX1 now as it’s not purely tech.
Edit: Forgot to say I will also be investing into an MSCI all world etf for diversification, exposure to emerging markets.
Thank you @nedjohn yes I see now that they are very different, I will go with NDX.
I’ll be glad to see the back of SJP, I’ve wasted years with them. Unfortunately some of my investment is stuck in their suspended Property Unit Trust so I’m still not completely free of them just yet.
Edit: Forgot to say I will also be investing in an MSCI all world etf for diversification.
@BraveDave23
All-World plus NDX looks reasonable if you like to tilt towards Growth companies (Tech-related and others), and are optimistic for the US in future. The non-Tech in NDX tend to be technology exploiters even if not pure Tech companies.
I was stuck in a property fund for a year in 2008. Learn and move on (eventually) is all you can do. I keep to liquid investments now, as you never know what’s coming. Property Investment Trusts and property company ETFs are an option if you like Property, and you can sell any time if want or need to.
You can buy both on IE. I bought the hedged version as it was the better buy at the time. With £ @ $1.26 I think EQGB still has a slight edge and I have enjoyed its 44% price increase this year.
Please note that, curiously, EQQQ is a distributor while EQGB is an accumulator.
Both are more volatile than S&P 500 of course, but I balance this with a dollop of the financials-heavy VHYL
