There has never been a better time to be an investor. No Matter your age, investing experience, investing temperament or income level, there are a number of investment options that are right for you. I recently wrote a piece discussing a few of my favorite Exchange Traded Funds geared for all investors. Most investors should buy a few of the ETFs I mentioned in the piece or ETFs similar in nature and be set. But, after writing that piece, I began to think about how different age groups have different interests and different goals with their money and may want to further diversify their holdings based on their personal preferences.
So with that in mind, today we will be talking about three ETFs that investors in their 20's would be interested in. But before we get any further, everyone should remember the ETFs mentioned in the previous piece should still make-up a portion of your investment able assets, simply due to their stability and diversity.
Unlike any generation before them, anyone in their 20's has literally grown up with technology being a huge part of their lives. With that in mind, the first ETF I propose is the Vanguard Information Technology Index ETF (PACF:VGT). The VGT tracks a market cap-weight index of different technology companies. Currently, 99.91% of VGT's assets are in U.S.-based technology companies. VGT has over 47% of its assets in Software and IT Services stocks, 16% in Computers, Phones and Hardware stocks, 12% in semiconductors and semiconductor equipment stocks, and another 11% in communications and networking stocks.
The funds top five largest holdings follows; Apple (AAPL) at 12.48%, Alphabet (GOOG) at 9.97%, Microsoft (MSFT) at 9.02%, Facebook (FB) at 6.15%, and Intel (INTC) at 3.63%. But, despite the large concentration in its top ten holdings (representing 56% of the fund's assets), VGT still holds 377 tech stocks, giving investors exposure to a very wide range of stocks, including tons of small and micro-cap plays. VGT is also very large with over $9.41 billion in assets under management, a very low expense ratio of 0.10%, a dividend yield of 1.86%, and easily tradable with a three-month average trading volume of 348,000 shares per day. Lastly, VGT has shown strong performance with its year-to-date return of 8.6%, one-year return of 18.8%, the five-year return of more than 107% and the ten-year return of 138%.
Sticking to what the 20 somethings know, the next ETF built for them focuses on an industry they probably know better than any other age group, social media. The Global X Social Media ETF (NASDAQ:SOCL) tracks a market-cap-weighted index of social media companies. SOCL is currently the only ETF that strictly invests in social media stocks. The ETF only consists of 30 stocks, with the top five consisting of, LinkedIn (LNKD), Tencent Holdings, Facebook, Twitter (TWTR), and NetEase (NTES) and the top ten making up 69% of the portfolio.
SOCL has only been in existence since November of 2011, but since that time it has performed very well. Year-to-date it is up more than 18.7%, the one-year return is nearly 38%, and since inception, it is up more than 85.5%. SOCL's expense ratio is a bit high at 0.65% and has a current price-to-earnings ratio of more than 180, making it a little too risky for most age groups. But, with the long time horizon 20-year-olds have to invest, they can take on more risk than say a 60-year-old. Plus if we take the advice of Peter Lynch and invest in what you know, this seems like the perfect play for anyone in their 20's and is even slightly like their peers and is addicted to social media.
Lastly, with the world growing smaller day-by-day, 20-year-olds need some exposure to international companies, but just not any international market. While Brazil and India may be great investment locations in another few years, China currently offers the best risk-reward option. Furthermore, sticking to the technology revolution currently taking place the Guggenheim China Technology ETF (PACF:CQQQ) is my last pick.
The CQQQ tracks a broad array of Chinese technology companies consisting of 69 stocks. The bulk of CQQQ's assets currently sit in the Software and IT Services sector but has exposure to the computers, phones, and hardware sector as well as other electronics, renewable energy, semiconductors, and communications and networking to name a few. CQQQ's top holdings consist of Tencent Holdings, Alibaba (BABA), NetEase, Qihoo 360 (QIHU), AAC Technologies, and Lenovo.
CQQQ has been around since December 2009 and has another high expense ratio of 0.7%, but since the fund invests in international stocks, the price is reasonable. CQQQ also pays a dividend yield of 1.82% which makes up for the higher expense ratio and has performed well over the last few years; up 9.2% year-to-date, 39% over the last 12 months, and 63% over the last five years.
No matter what anyone tells you or how little extra cash you have lying around, now is the time for 20-year-olds to start investing. Buying any of the ETFs mentioned above or just a regular S&P 500 index fund is an easy, cost-effective way to get your feet wet in the market while keeping your research to a minimum.
Not in your 20's and want to know which ETFs fit your age group? Check back soon as I continue to go through the wide array of ETFs and pick three that make sense for each age group.
Matt Thalman
INO.com Contributor - ETFs
Follow me on Twitter @mthalman5513
Disclosure: This contributor currently holds long positions in Apple, Alphabet, Microsoft, Facebook, Intel, LinkedIn Corporation and Twitter at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.
