Tech ETFs saw massive inflows of over $17 billion last year, according to VettaFi. However, Financial Futurist Dave Nadig, says many are “overdone” in mega-caps like Nvidia (NVDA) and Meta (META) which drive gains. He warns of “concentration risks,” noting that in the Technology Select Spdr Fund (XLK) just 5 names account for more than 50% of the fund.
Nadig advises those investing in tech to “look for strategies that are a little bit more equal-weighted.” He suggests something like the Robo Global Robotics and Automation Index ETF (ROBO) which is “much more balanced” with global diversification across use cases.
Many tech ETFs have “hyper-concentrated” portfolios, with stocks like Microsoft (MSFT), for example, dominating the top holdings. On the days that dominate stock does well, “performance will beat everybody else,” while down days see similar exaggerated moves. Nadig recommends focusing on long-term plays that “benefit over the cycle, not just over the headline.”
Akiko Fujita | Yahoo Finance