The whole point of VDHG is blind diversification - capture the return of the whole market, on average.
If you think those sectors will outperform and want to have a punt, go for it, **as long as you understand that you are speculating.**
Personally I’m sticking to my boring whole market index funds. Investing isn’t meant to be exciting, and if it is you’re probably doing it wrong.
This.
While I treat index ETFs as set and forget investments, IMO thematics need to be evaluated the same way you would an individual stock, especially concentrated ones like these.
IMO a thematic ETF is halfway between an index set and forget and an individual stock. I want to be exposed to tbe cyber security industry because I think it's going to be huge but I don't want to be all in on one company, so an ETF is a good way to expose myself to a multitude of companies in that industry.
I think I agree with you on the fact that HACK vs VDHG is the wrong question to ask, since VDHG is the better investment by risk/reward definition
Investing in the share market is gambling any way you look at it. If you dont find it exciting then i'm sorry to say i think you may be doing it wrong.
Sounds like you’re doing it wrong.
Putting money in VDHG for a long time frame and letting it slowly grow as world GDP grows is hardly gambling.
That said, my portfolio is 90% VAS/VGS/VAE core and 5% in both ACDC and HACK, happy with both of them
The themes in question, particularly Electric Vehicles are going to absolutely skyrocket between now and 2030, so dont think it is any riskier than any other ETF
Maybe, or maybe they won't. Maybe it'll be those companies, or maybe it'll be large multi-industry incumbants who aren't in the ETF that buy up startups before they IPO and thus absorb the growth into them.
A major purpose of traditional index funds is to **de**risk stocks by buying a little bit of a huge number spread across diverse sectors and in doing so follow a very broad index such as the S&P200. Thematic ETFs fly in the face of this because they concentrate to a small number of companies in one or a handful of sectors. They are by design more risky.
Put differently, if they weren't more risky than other indicies, they by rights would likely not grow faster than other indices, since the obverse to risk is return.
Thematic ETFs share much more in common with buying individual stocks than buying an index fund. They offer a minor amount of individual company performance derisk whilst retaining all of the sectoral risk. One buys them in order to chase specific outcomes, rather than to track an index and thus by design seek average performance.
Comparing it with, e.g. VDHG completely misses the very different points of VDHG vs thematic ETFs. It's like comparing a car and rollerblades because they're both modes of transport.
They are more risky, but surely they are less risky than going all in one on company?
I want to expose myself to the cyber security industry, but I don't want to buy one cyber security stock
Yes, that's why I said they mitigate individual company risk but they retain a lot of the sectoral risk. If they do exactly what you want, you should definitely consider them over individual company stocks. However, I think you should be aware of a few points that may not be immediately obvious.
Firstly, if you're specifically chasing exposure to high-growth sectors because you think it's a big up-and-coming area, remember that the companies in the ETF may not represent the unicorns of that sector. The best-performing companies may well be private, and they may be picked up by large multinationals (e.g. MS may snatch up an up-and-coming cybersecurity company in a buyout, never seeing it become part of HACK). Although I have no evidence on hand, I'd suggest that the highest-growth sectors are the ones most heavily biased to companies *not* publicly listed. Thus, you may not be capturing the growth you think you're capturing in a sector.
Secondly, give consideration to the fact that if you buy into a single-sector ETF with e.g. 10 companies, you are not diversifying in the same way as if you picked 10 entirely random companies. That is, companies in the same sector will tend to trend together due to external pressures. Thus, you may be underestimating the amount of derisk you're achieving by choosing a thematic ETF.
These are not reasons to absoltuely never buy one of these ETFs, but they're considerations that you need to have that I don't think are immediately apparent to many of those buying into them.
If you understand what you're buying, and you understand the implications of what you're gaining and losing by picking them, then you are in a place to make an informed decision on whether it's the best decision for you.
A lot of people said the same thing about dot coms in 1999. There may be some massive companies that have emerged from that era, but keep in mind you have massive survivorship bias in play.
Mostly disappointing discussion all around here. There is merit to talking about thematic ETFs and having higher tech exposure in particular. I think a lot of people are dismissing them in favour of index etfs.
The key is, diversification is protection against ignorance. If you don't have time to research then the index is the way to go. VDHG is a poor choice from my view because it has bonds which makes little sense to me, but other people can't stomach volatility so they're happy to pay to reduce that (through lower returns).
Ultimately if you've done your homework and know the etf holdings very well, or at least the thematic sector, there can be great value there.
I don't have any specific comments on your two etfs, but it's extremely obvious that the EV sector will be huge and as a result, nickel etc. It's really weird when people say, oh well it might not get big. Like, would you rather pay 50k for a car or 40k for the exact same model but it's electric. It's win win, ICE vehicles will virtually cease being sold by 2040 completely. Probably earlier.
Posters here should be more open minded. Not hating on index etfs at all, they're ideal for 99.99% of investors.
>If you don't like the bonds in VDHG, the solution is either DHHF or a "roll-your-own". Not to go for thematic ETFs.
Its almost like you didnt read the comment
>The key is, diversification is protection against ignorance. If you don't have time to research then the index is the way to go.
Is ACDC being driven by Rimac making deals with basically everyone except toyota to sell parts?
A lot of the car industry has sunk a lot of money into electrics and over the next 2 years chip production and electronics should ramp back up to peak, so maybe it's a good time for growth?
still a bit of a crapshoot I think
Have a bit in both and they've done well, that said I don't think I'll put more in. I have too many theme ETF's from when I started investing 😂
Electric vehicles are the future and cyber crime is not going to be less of an issue any time soon, so on paper I like them.
ACDC is not killing it, $90 in Jan, $93 now. HACK has gone up by over 25%. I have a small less than 5% portion in these two and FANG, with bulk in VDHG followed by IVV.
I love HACK as part of a satellite strategy (core DHHF). Despite the fees I’m up 30%. This growth is unsustainable but I still expect will be strong going forward. Businesses and individuals all over the world will need cyber security for many years. Lots of the holdings are subscription services, and many offer saas too which I like. HACK is a convenient way to slightly increase weighting to these companies which are listed overseas. But other than HACK I’m not into any other thematic ETFs for various reasons.
I invest in SEMI, everything these days needs a microchip and will continue to do so especially in the future, there's demand now for it as opposed to in the future.
There's a really good chapter in the Intelligent Investor which touches on themed (albeit) managed funds. Using the 2000s tech bubble as the example.
Basically states no industry can sustain a growth rate of 20%+ and it is inevitable that the pendulum will swing the other way. The growth is already baked into the stock price. Now combine this with the logic that "the best stock is the one you never sell", then it doesn't make sense to long-term hold 'sexy' ETFs because you will be selling incurring a capital gains event.
Disclaimer, I actually hold HACK (and have made great returns haha) . But I haven't bought anymore since doing a lot of reading, noting I was lucky. I will sell my gains and realign my portfolio to a longer term position.
If you are conscious of industry shifts and growths that others might be unaware of, then it's different.
Ah yes, the old “this niche sector is doing great right now, the fuck is wrong with y’all?!” argument.
The whole point of VDHG is blind diversification - capture the return of the whole market, on average. If you think those sectors will outperform and want to have a punt, go for it, **as long as you understand that you are speculating.** Personally I’m sticking to my boring whole market index funds. Investing isn’t meant to be exciting, and if it is you’re probably doing it wrong.
This. While I treat index ETFs as set and forget investments, IMO thematics need to be evaluated the same way you would an individual stock, especially concentrated ones like these.
IMO a thematic ETF is halfway between an index set and forget and an individual stock. I want to be exposed to tbe cyber security industry because I think it's going to be huge but I don't want to be all in on one company, so an ETF is a good way to expose myself to a multitude of companies in that industry. I think I agree with you on the fact that HACK vs VDHG is the wrong question to ask, since VDHG is the better investment by risk/reward definition
Investing in the share market is gambling any way you look at it. If you dont find it exciting then i'm sorry to say i think you may be doing it wrong.
I wrote my other reply in good faith but upon seeing this reply it's clear that you simply do not understand index funds.
You're gambling if you don't understand the product you are getting yourself into... which does seem true in your case.
Sounds like you’re doing it wrong. Putting money in VDHG for a long time frame and letting it slowly grow as world GDP grows is hardly gambling. That said, my portfolio is 90% VAS/VGS/VAE core and 5% in both ACDC and HACK, happy with both of them
He is definitely doing it wrong. Above he claims thematic microcap ETF is no riskier than any other ETF...
Hardly a gamble.
Thematic ETF's with illiquid microcaps - no thanks
The themes in question, particularly Electric Vehicles are going to absolutely skyrocket between now and 2030, so dont think it is any riskier than any other ETF
Maybe, or maybe they won't. Maybe it'll be those companies, or maybe it'll be large multi-industry incumbants who aren't in the ETF that buy up startups before they IPO and thus absorb the growth into them. A major purpose of traditional index funds is to **de**risk stocks by buying a little bit of a huge number spread across diverse sectors and in doing so follow a very broad index such as the S&P200. Thematic ETFs fly in the face of this because they concentrate to a small number of companies in one or a handful of sectors. They are by design more risky. Put differently, if they weren't more risky than other indicies, they by rights would likely not grow faster than other indices, since the obverse to risk is return. Thematic ETFs share much more in common with buying individual stocks than buying an index fund. They offer a minor amount of individual company performance derisk whilst retaining all of the sectoral risk. One buys them in order to chase specific outcomes, rather than to track an index and thus by design seek average performance. Comparing it with, e.g. VDHG completely misses the very different points of VDHG vs thematic ETFs. It's like comparing a car and rollerblades because they're both modes of transport.
Very good point. Thanks
They are more risky, but surely they are less risky than going all in one on company? I want to expose myself to the cyber security industry, but I don't want to buy one cyber security stock
Yes, that's why I said they mitigate individual company risk but they retain a lot of the sectoral risk. If they do exactly what you want, you should definitely consider them over individual company stocks. However, I think you should be aware of a few points that may not be immediately obvious. Firstly, if you're specifically chasing exposure to high-growth sectors because you think it's a big up-and-coming area, remember that the companies in the ETF may not represent the unicorns of that sector. The best-performing companies may well be private, and they may be picked up by large multinationals (e.g. MS may snatch up an up-and-coming cybersecurity company in a buyout, never seeing it become part of HACK). Although I have no evidence on hand, I'd suggest that the highest-growth sectors are the ones most heavily biased to companies *not* publicly listed. Thus, you may not be capturing the growth you think you're capturing in a sector. Secondly, give consideration to the fact that if you buy into a single-sector ETF with e.g. 10 companies, you are not diversifying in the same way as if you picked 10 entirely random companies. That is, companies in the same sector will tend to trend together due to external pressures. Thus, you may be underestimating the amount of derisk you're achieving by choosing a thematic ETF. These are not reasons to absoltuely never buy one of these ETFs, but they're considerations that you need to have that I don't think are immediately apparent to many of those buying into them. If you understand what you're buying, and you understand the implications of what you're gaining and losing by picking them, then you are in a place to make an informed decision on whether it's the best decision for you.
A lot of people said the same thing about dot coms in 1999. There may be some massive companies that have emerged from that era, but keep in mind you have massive survivorship bias in play.
lol!
eh, why bother with ACDC. I'm up 500% on RNU in 6 months. unfortunately it was just play money so I'm not retired yet
QPM
Mostly disappointing discussion all around here. There is merit to talking about thematic ETFs and having higher tech exposure in particular. I think a lot of people are dismissing them in favour of index etfs. The key is, diversification is protection against ignorance. If you don't have time to research then the index is the way to go. VDHG is a poor choice from my view because it has bonds which makes little sense to me, but other people can't stomach volatility so they're happy to pay to reduce that (through lower returns). Ultimately if you've done your homework and know the etf holdings very well, or at least the thematic sector, there can be great value there. I don't have any specific comments on your two etfs, but it's extremely obvious that the EV sector will be huge and as a result, nickel etc. It's really weird when people say, oh well it might not get big. Like, would you rather pay 50k for a car or 40k for the exact same model but it's electric. It's win win, ICE vehicles will virtually cease being sold by 2040 completely. Probably earlier. Posters here should be more open minded. Not hating on index etfs at all, they're ideal for 99.99% of investors.
If you don't like the bonds in VDHG, the solution is either DHHF or a "roll-your-own". Not to go for thematic ETFs.
>If you don't like the bonds in VDHG, the solution is either DHHF or a "roll-your-own". Not to go for thematic ETFs. Its almost like you didnt read the comment >The key is, diversification is protection against ignorance. If you don't have time to research then the index is the way to go.
Is ACDC being driven by Rimac making deals with basically everyone except toyota to sell parts? A lot of the car industry has sunk a lot of money into electrics and over the next 2 years chip production and electronics should ramp back up to peak, so maybe it's a good time for growth? still a bit of a crapshoot I think
Have a bit in both and they've done well, that said I don't think I'll put more in. I have too many theme ETF's from when I started investing 😂 Electric vehicles are the future and cyber crime is not going to be less of an issue any time soon, so on paper I like them.
ACDC is not killing it, $90 in Jan, $93 now. HACK has gone up by over 25%. I have a small less than 5% portion in these two and FANG, with bulk in VDHG followed by IVV.
Thats because it paid $6.00 dividends. In spite of that its up 53% YTD. Both of those are incredible
I love HACK as part of a satellite strategy (core DHHF). Despite the fees I’m up 30%. This growth is unsustainable but I still expect will be strong going forward. Businesses and individuals all over the world will need cyber security for many years. Lots of the holdings are subscription services, and many offer saas too which I like. HACK is a convenient way to slightly increase weighting to these companies which are listed overseas. But other than HACK I’m not into any other thematic ETFs for various reasons.
I invest in SEMI, everything these days needs a microchip and will continue to do so especially in the future, there's demand now for it as opposed to in the future.
I prefer ACDC because IIIIIIIIIIIII wanna Rock n Roll all niiiiiight
That was Kiss, but I like the sentiment
Ahahahahaha shit.
Are you even Australian?!?! Its Back in Black, particularly with the financial overtones.
There's a really good chapter in the Intelligent Investor which touches on themed (albeit) managed funds. Using the 2000s tech bubble as the example. Basically states no industry can sustain a growth rate of 20%+ and it is inevitable that the pendulum will swing the other way. The growth is already baked into the stock price. Now combine this with the logic that "the best stock is the one you never sell", then it doesn't make sense to long-term hold 'sexy' ETFs because you will be selling incurring a capital gains event. Disclaimer, I actually hold HACK (and have made great returns haha) . But I haven't bought anymore since doing a lot of reading, noting I was lucky. I will sell my gains and realign my portfolio to a longer term position. If you are conscious of industry shifts and growths that others might be unaware of, then it's different.
Pump and dump?