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Index Funds; tech concentration, trading
Old 01-20-2020, 11:11 AM   #1
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Index Funds; tech concentration, trading

I was looking at our portfolio this morning, primarily to see what our AA was doing and I ran across a Schwab "Mutual Fund Report Card" for VTWAX, our primary holding:
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There is a lot of sturm und drang around here about index funds being concentrated in tech and about passive investing's effect on price discovery. In the report I find that tech is weighted about the same as financial services, at 17%. This is less tech concentration than I expected, though truthfully I have not given it much thought. The report also shows a portfolio turnover of 7%. I would have guessed about 5%, so no surprise there. The fund holds about 7,400 stocks, so that trading is spread pretty thin across the world market.

I don't have any particular conclusions to argue. I just thought people might like to see some real numbers. (The concentration numbers would be quite different, of course, for an S&P 500 fund. Which is one of the reasons why I haven't and won't buy any US large cap sector fund.)
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Old 01-20-2020, 11:32 AM   #2
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Even with that Vanguard fund, the problem is the 5 tech companies in the list of top holdings contributed an outsized amount to the gains.

Although there are about 7400 stocks held, the 5 tech companies were 8% of the fund. It's not much different than the situation with S&P index funds.
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Old 01-20-2020, 11:33 AM   #3
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I'd be curious to see how many of the Health Care stocks are really tech stocks in the health care sector. Companies like Thermo Fisher, Boston Scientific, Medtronic, Intuitive Surgery, etc. are basically medical device companies, and not strictly health care providers or services.

In other words, VTWAX may have more tech exposure than you think.
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Old 01-20-2020, 11:47 AM   #4
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Originally Posted by njhowie View Post
Even with that Vanguard fund, the problem is the 5 tech companies in the list of top holdings contributed an outsized amount to the gains. ...
Sure. That's the nature of the game. Any of the quilt charts can show you that. I tell my investing class students to remember the copilot's checklist: Sit down, shut up, and hang on.

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Originally Posted by Qs Laptop View Post
I'd be curious to see how many of the Health Care stocks are really tech stocks in the health care sector. Companies like Thermo Fisher, Boston Scientific, Medtronic, Intuitive Surgery, etc. are basically medical device companies, and not strictly health care providers or services.

In other words, VTWAX may have more tech exposure than you think.
I'm too lazy but here's the link: https://sec.report/Document/0001752724-19-135706/
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Old 01-20-2020, 12:08 PM   #5
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I'm too lazy but here's the link: https://sec.report/Document/0001752724-19-135706/
Looks like a list of small cap world stocks.
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Old 01-20-2020, 12:23 PM   #6
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Originally Posted by Qs Laptop View Post
Looks like a list of small cap world stocks.
Try this one: https://www.sec.gov/Archives/edgar/d...fnd0731191.htm or rummage around sec.gov for yourself to find the right report.
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Old 01-20-2020, 03:21 PM   #7
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Quote:
Originally Posted by Qs Laptop View Post
I'd be curious to see how many of the Health Care stocks are really tech stocks in the health care sector. Companies like Thermo Fisher, Boston Scientific, Medtronic, Intuitive Surgery, etc. are basically medical device companies, and not strictly health care providers or services.

In other words, VTWAX may have more tech exposure than you think.
It depends how you broadly you define "Tech," and how much that matters for investing movement.

The Research Triangle Park of NC (RTP) has pretty much always had this interesting bifurcation of electronics tech, and health tech. They move very differently based on economic and political winds. iPhones and laptops have completely different markets than chromatography and PCR assay devices, even though at their basic gut level, they are tech machines.

Social events in RTP are always interesting as the two groups meet up. We speak different languages, but share a similar foundation in heavy and rigorous education.
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Old 01-20-2020, 03:25 PM   #8
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A few years ago, I started a thread about the fact that I own a lot of Apple, even though I don't have the individual stock. This gives me a little bit of pause. Apple is over 3% of my portfolio when I break it all down.

http://www.early-retirement.org/foru...too-86642.html
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Old 01-20-2020, 03:40 PM   #9
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If you looked at US total stock market, you would see Tech at 22% percent.

US dominates tech industry globally - so I am comfortable with it.

When the market corrects, the proportions would change.
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Old 01-20-2020, 06:07 PM   #10
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Tech companies play a big part in everyone's life. There's no denying it.

What I see is that the big names that dominate the market have higher P/E than the overall market.

S&P: 22.3 (from Yardeni)
Amazon: 82.6
Google: 31.8
Apple: 26.8
Facebook: 35.5
Microsoft: 31.5

Obviously, the market expects the above companies to grow revenues and earnings a lot faster than that of the entire market and the economy. Time will show if they can all do that.
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Old 01-22-2020, 12:51 PM   #11
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Interesting thing is correlation between S&P500 and the total world index is nearly 1.0 but total world index since the low of 2009 has returned about 1/2 of the S&P500 as sales and profits of the world are being abosrbed more and more into the largest companies.

Since June 2008 SP500 up 220% Total world index up 110 percent
Since March 2009 S&P500 up 413% Total World up 257%

Even so far this year S&P500 is up 2.1% while the Total World Index is up 0.9%.

In the little fourth Quarter decline of 2018 S&P500 declines 19% Oct 1-Dec 31st Total World declined 17%
From June of 2008 to March of 2009 the S&P500 declined 48% Total World declined 52%. So even rebalancing if you owned both S&P500 and the Total World only has the effect of reducing results versus the total world as their correlation in performance is so high.

So past 12 years indicates less upside while equal downside risk on the S&P500 versus the total world index. Total World requires a seriously weakening US dollar to outperform based on present market conditions, which could occur, this has merely been a very expensive insurance policy over the last 12 years - on 600K investment in 2009 of a 60/40 portfolio the cost is $936,000 or $78,000 annually for Nobel based portfolio insurance. (7.8% annual fixed charge on a million dollar portfolio in 2009)

So you can sell half of your S&P500 and invest in US Treasury Bills for safety and earn the a slightly better return than the Total World index based on the last 12 years of results.
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Old 01-22-2020, 02:21 PM   #12
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Interesting thing ...
Well, no. I have reread the thread and my OP and don't see anyone who has asked for any kind of analysis of VTWAX as an investment. At this point, my poster-meter has moved from "amusing" to "annoying," so I have put you on my very short "ignore' list.
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