According to VettaFi, tech ETFs received massive inflows of more than $17 billion last year. But Dave Nadig, a financial futurist at VettaFi, says many of the profit-driving mega-cap stocks like Nvidia (NVDA) and Meta (META) are “overdone.” He warned of “concentration risk” in the Technology Select Spdr Fund (XLK), noting that just five names accounted for more than 50% of the fund.
Nadig advises technology investors to “look for strategies that are a little more evenly weighted.” He suggests global diversification across use cases and something like the ROBO Global Robotics and Automation Index ETF (ROBO), which is “more balanced”.
Many tech ETFs have “hyper-concentrated” portfolios, with stocks like Microsoft (MSFT) making up the top holdings. On strong days, stocks “outperform other stocks,” but on down days, similar exaggerated movements are seen. Nadig recommends focusing on long-term strategies that “deliver benefits throughout the cycle, not just the headlines.”
Beyond technology, Nadig highlighted healthcare as an attractive sector, calling the Simplify Healthcare ETF (PINK) an exposure to biotech/pharma without having to “completely pivot” and calling it a “great balance.” ” is proposed to be provided.
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Editor’s note: This article was written by angel smith