Indexed technology investments?

[SecondCor521]

Hi,

My son wants to invest his Roth IRA contribution this year in "technology". I'm encouraging him to get a diversified investment such as a mutual fund or ETF. I also like index/passive investing.

I looked around and found VGT (Vanguard IT Index Fund ETF). Any other suggestions for him to consider?

 

[greydog17]

Comparable technology EFT at Fidelity is FTEC.

 

[RockyMtn]

xlk!

 

[LOL!]

What investments do all his friends use?

 

[SecondCor521]

What investments do all his friends use?

He's 16. All of his friends, as far as I know, don't invest in Roth IRAs.

 

[exnavynuke]

Knowing nothing else about his finances, I'd say this is a good time to explain to him the downsides of investing in only slivers of the economy and how damaging that can be to one's portfolio; for instance, show him how a "technology portfolio" would have fared from 2001-2003 and then show him the relative performance of a more balanced portfolio.

 

[kgtest]

AAPL. Although I would set the limit to around $99... that'll teach him two things...
1. Buy low
2. Patience

 

[mpeirce]

I'd advise him to invest *most* of his assets in something like the total market index, but to put some into individual stocks or targeted funds.

Honestly, there is no better way to learn about the need for diversification than losing some* money on individual stocks. Loosing a few dollars now is a much better way to learn about the market than book learning or stories from parents.

 

[DrRoy]

I'd advise him to invest *most* of his assets in something like the total market index, but to put some into individual stocks or targeted funds.

Honestly, there is no better way to learn about the need for diversification than losing some* money on individual stocks. Loosing a few dollars now is a much better way to learn about the market than book learning or stories from parents.

+1 How about 80% in a total market ETF, and then any of the above tech ETF's will do for the rest.

 

[SecondCor521]

Thanks all.

He is now 20% NKE, 31% FTEC, and 49% SWTSX.

We do talk about diversification, costs, starting early, not churning, and all of that stuff. I know tech crashed in 2001-2003, but my belief is that long term it will do about as well as the broader market, so I'm not concerned about his investment from that point of view.

 

[braumeister]

AAPL. Although I would set the limit to around $99... that'll teach him two things...
1. Buy low
2. Patience

I tend to agree. At least a few shares of AAPL, the rest in an ETF. Although I would set the bar for AAPL at $110. With a P/E right now of less than 15 compared to the S&P 500's 25, I don't think he could go too far wrong long term even at today's price.

 

[Totoro]

Given that, as far as I know, all profits from Apple come from one single product, namely the Iphone, I would be very wary.

Remember Nokia? Blackberry?

 

[braumeister]

as far as I know, all profits from Apple come from one single product, namely the Iphone

About 60%, actually. But that's a legitimate concern. I still believe they are going to come out with new products that will be as game-changing as the iPhone. We'll see.