Hi - believe this is the busiest board left, and probably a lot of seasoned investors familiar with ETFs, so thought I would ask, since my board is filled with mainly shy lurkers.
I am not looking to debate whether being long/short any particular ETFs make sense right now, rather I just don’t know a good place, versus randomly searching via Google, to find the composition of various ETFs.
I sort of want to find funds that largely are excluding FANG/cloud/saas type tech stocks. But I don’t want just an oil/gas or just a financials ETF…looking for something like S&P500 minus FANG or close to it, if such a thing exists.
The DIA or inverse DOG isn’t too bad, but still has MSFT and AAPL.
QQQE is interesting in being equal weight, so at least FANG types cant be disproportionate amount of fund, but I would rather have them excluded all together.
Why? Basically think the next leg down, or next hit to valuations, will come more from effects/anticipation of recession and reduced earnings vs inflation (which has peaked, imo). So while I believe Tech could/should drop much more still, ala 2000-2002, I also am wary of the lightning-fast rallies and BTFD bros that still ignore things like SBC or valuation. So would like to short a broad ETF that reflects more the companies that could see earnings pressures and resulting stock price pressures over next 6 months or so.
thanks in advance for any ETF research suggestions!
Interesting! Aside from Google I’m not sure how to find such a beast. The PITA thing to do would be to look at the top 50 holdings of VOO, and then remove any stock you don’t want, see what the relative positions are of what is left, and start buying.
As I said, it is a PITA.
Or look at a large cap value ETV (VTV, for example) and see what they hold.
Or dividend fund, like VYM, since many of the stocks you are trying to avoid either pay no dividends, or small dividends (and thus likely not in a high dividend ETF).
That is exactly what I was looking for in late 2021. I couldn’t find one so I invested in QQQE (lower proportion of FAANGs) and also a consumer staples fund. When the entire market started dropping I sold them both.
The problem with buying any “short” or “inverse” fund is that it is harder to make up losses on a percentage basis. If the fund loses 33% of its value it then has to rise 50% to get back where it started.
My plan is to wait until stocks drop further before buying. The Fed has announce that it will keep raising the fed funds rate until inflation drops to its target of 2% even though it expects “pain” in the economy.
Scenarios in the stock market during economic “pain” from higher interest rates
Revulsion/ panic. This is a clear signal that shows in a sudden drop of the indexes plus a VIX that spikes over 30. If a financial panic happens simultaneously, Financial Stress will spike and VIX will spike over 50. That is a rare but unmistakable signal. (Charts at the bottom of the post.) This is a frightening situation but also a stellar buying opportunity. Using this signal, I bought TIPS in October 2008 and XOM in March 2020.
Ordinary recession. This has happened many times before. The buy signal is the “mungofitch 90 day rule” when the market makes new highs for 90 trading days. Our capitalist economy is naturally prone to waves of expansion and recession. The signal for this is an inversion of the yield curve which usually happens about a year before the recession starts. The 10 year Treasury - 3 month Treasury spread is a clear signal. Stock prices fall during a recession then recover when the economy begins to grow again.
Stagflation. This happened in the 1970s and could happen again since the Fed is deliberately suppressing the economy without the certainty of controlling inflation. (Inflation at this point is caused by wage-price pressures familiar from the 1970s.) The 1970s stock market was characterized by years (1968 - 1982) of volatile swings with lower highs and lower lows. (Especially clear when the chart is inflation-adjusted.) Unlike ordinary recessions, the stagflationary stock market did not recover decisively until the severe 1980-82 recession brought the highest interest rates and lowest stock prices in a generation. Since we are just at the beginning of such a scenario (if it materializes) it would not be a propitious time for a buy and hold investor. A risk-averse investor would buy TIPS to preserve the purchasing power of cash during a high-inflation environment.
I hold one etf that is light on FAANG and has held up relatively well this year and that is Vig- vanguard dividend appreciation fund. I hold one large low cost value mutual fund, which has been level this year and generating dividends- veirx,
Hello lifeofdreamer, I have an idea that is very close to what you’re looking for!
Not financial advice yada yada.
My thought was if an ETF existed that excluded top 10 or so of S&P500, as an example.
You can buy a set of sector ETFs for banks, health, retail, oil, miners, defense. Won’t get you universal coverage but will exclude tech. Not ‘SP490’ but close enough probably.
There’s a nice ETF in Europe called VHYL Vanguard High Yield which is a high yield filter. Most tech doesn’t pay good yields. And the most overpriced tech certainly doesn’t. This gets you about 50% of the universe of investable universe of developed countries, several thousand stocks, mostly medium-big stocks, few positions more than 1%.
Almost exactly what you want option: You can buy the ETF ‘$RSP’ to get the SP500 but with weights of 0.2% on every stock. This limits your investment in the top 10 to just 2% of the ETF. By definition, this ETF is 98% exactly what you’re asking for. It’s also relatively cheap to run (0.2%/annum), unlike some of the sector ETFs. So even that tiny 2% of money wasted on ‘S&P rank 1-10 stocks’ will be ‘effectively free’ anyway after a few years in saved running costs.
HOWEVER. It’s worth considering that the current crash has hardly affected ETFs that track the DJIA, VHYL etc. The bulk of the crash is in tech. To the point that you begin to wonder if it’s still worth avoiding it.
I’m a ‘never tech’ investor who hasn’t held a tech stock in almost 20 years, but I’m looking at tech stocks this year because some of them are actually getting close to reasonably priced at -50% off.
I think tech has more to fall, but I am also wary of the quick/fast rebounds it can have, thus why I want to exclude them (neither be long nor short on tech) if possible.
I will look into RSP…sounds like QQQE but for S&P500.
I want to short, or go long on an inverse etf.
I am shorting, or will short again soon, some individual stocks, but I don’t want to try shorting ten or more.
Hi Wendy - thanks for the long answer.
To be clear, I may look at some inverse funds, but also open to shorting an ETF. I am leveraging DOG right now, to essentially short the DOW.
I agree with your 3 scenarios, and regardless of which outcome occurs, I don’t plan on being net long in the short-term or maybe medium-term. But because we can have some violent BMRs along the way, I want to exclude, or reduce the weighting, of tech a bit, in any ETFs I try to short.
appreciate all these suggestions…I have a couple to put on my tracker now and look further into…thanks all!
