Any way to exclude FAANG company from S&P index fund?

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flybird145
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Any way to exclude FAANG company from S&P index fund?

Post by flybird145 »

Hi everyone,

Are there any funds that consist of an index fund that tracks S&P but without specific tech companies in there? For example, if someone worked at Microsoft, it might be prudent for them to avoid buying any extra Microsoft stock since they receive that as compensation, and their job is tied to the company's performance.

Or, some of us may not really be interested in owning Tesla stock once that, too, becomes part of S&P 500.

Any ideas / solutions?
Soon2BXProgrammer
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Re: Any way to exclude FAANG company from S&P index fund?

Post by Soon2BXProgrammer »

consider buying some equal weight SP500 to dilute the rest of your portfolio.

I wouldn't bother.. but its an idea.
MarkRoulo
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Re: Any way to exclude FAANG company from S&P index fund?

Post by MarkRoulo »

flybird145 wrote: Wed Nov 18, 2020 11:46 pm Hi everyone,

Are there any funds that consist of an index fund that tracks S&P but without specific tech companies in there? For example, if someone worked at Microsoft, it might be prudent for them to avoid buying any extra Microsoft stock since they receive that as compensation, and their job is tied to the company's performance.

Or, some of us may not really be interested in owning Tesla stock once that, too, becomes part of S&P 500.

Any ideas / solutions?
If you just want to avoid a few specific stocks you can go short the appropriate number of shares in Apple/Facebook/Tesla/whatever to cancel out their influence in your S&P500 holdings.
HawkeyePierce
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Re: Any way to exclude FAANG company from S&P index fund?

Post by HawkeyePierce »

Far easier to simply dilute with international or small-caps.
Soon2BXProgrammer
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Re: Any way to exclude FAANG company from S&P index fund?

Post by Soon2BXProgrammer »

MarkRoulo wrote: Wed Nov 18, 2020 11:53 pm
flybird145 wrote: Wed Nov 18, 2020 11:46 pm Hi everyone,

Are there any funds that consist of an index fund that tracks S&P but without specific tech companies in there? For example, if someone worked at Microsoft, it might be prudent for them to avoid buying any extra Microsoft stock since they receive that as compensation, and their job is tied to the company's performance.

Or, some of us may not really be interested in owning Tesla stock once that, too, becomes part of S&P 500.

Any ideas / solutions?
If you just want to avoid a few specific stocks you can go short the appropriate number of shares in Apple/Facebook/Tesla/whatever to cancel out their influence in your S&P500 holdings.
I know when i worked for a megacorp, and i had stock compensation, i was barred from shorting the stock.
MarkRoulo
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Re: Any way to exclude FAANG company from S&P index fund?

Post by MarkRoulo »

Soon2BXProgrammer wrote: Thu Nov 19, 2020 12:00 am
MarkRoulo wrote: Wed Nov 18, 2020 11:53 pm
flybird145 wrote: Wed Nov 18, 2020 11:46 pm Hi everyone,

Are there any funds that consist of an index fund that tracks S&P but without specific tech companies in there? For example, if someone worked at Microsoft, it might be prudent for them to avoid buying any extra Microsoft stock since they receive that as compensation, and their job is tied to the company's performance.

Or, some of us may not really be interested in owning Tesla stock once that, too, becomes part of S&P 500.

Any ideas / solutions?
If you just want to avoid a few specific stocks you can go short the appropriate number of shares in Apple/Facebook/Tesla/whatever to cancel out their influence in your S&P500 holdings.
I know when i worked for a megacorp, and i had stock compensation, i was barred from shorting the stock.
There is that, but then we aren't discussing specific tech *companies*, but a specific tech company. One company.

My inclination at that point would be to forget about it. The largest holding of Vanguard Total Stock Market is Apple at about 5%. I wouldn't jump through hoops to avoid that 5% exposure just because I worked at Apple. The other top companies make up even less of the index and I expect the 95% of the index that isn't Apple (or whichever tech company we care about here) to dominate my returns.

The top five are around 18% together, so if you REALLY didn't want exposure to Apple, Microsoft, Amazon, Alphabet/Google, and Facebook then maybe shorting 5 stocks would be worthwhile. You only work at one of these companies at any given time, so shorting the rest should be do-able. But for 5% I don't think it makes much sense to try.

Avoiding exposure to a single stock is difficult if you (a) are prohibited from shorting that stock, and (b) want exposure to most of the rest of the market.
000
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Re: Any way to exclude FAANG company from S&P index fund?

Post by 000 »

SPXT excludes some of them.
ivgrivchuck
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Re: Any way to exclude FAANG company from S&P index fund?

Post by ivgrivchuck »

flybird145 wrote: Wed Nov 18, 2020 11:46 pm Any ideas / solutions?
I don't think that there is an easy way to achieve that.

One possibility is to put more weight on international (or small/mid caps), but it depends on your overall portfolio.
44% VTI | 36% VXUS | 10% I-bonds | 10% EE-bonds
kleiner
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Re: Any way to exclude FAANG company from S&P index fund?

Post by kleiner »

000 wrote: Thu Nov 19, 2020 12:11 am SPXT excludes some of them.
Thanks - this is exactly what I was looking for!
jyoung
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Re: Any way to exclude FAANG company from S&P index fund?

Post by jyoung »

kleiner wrote: Thu Nov 19, 2020 5:19 am
000 wrote: Thu Nov 19, 2020 12:11 am SPXT excludes some of them.
Thanks - this is exactly what I was looking for!
Be sure to look at the actual holdings of this or any fund for that matter. What you may consider "tech" vs their screens could be quite different. For instance, the top 3 holdings (roughly 14%) of this fund are:
1. Amazon
2. Facebook
3/4. Google
Not sure this sounds like what you want.

https://www.proshares.com/funds/spxt_da ... dings.html
inbox788
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Re: Any way to exclude FAANG company from S&P index fund?

Post by inbox788 »

jyoung wrote: Thu Nov 19, 2020 9:15 am
kleiner wrote: Thu Nov 19, 2020 5:19 am
000 wrote: Thu Nov 19, 2020 12:11 am SPXT excludes some of them.
Thanks - this is exactly what I was looking for!
Be sure to look at the actual holdings of this or any fund for that matter. What you may consider "tech" vs their screens could be quite different. For instance, the top 3 holdings of this fund are:
1. Amazon
2. Facebook
3/4. Google
Not sure this sounds like what you want.

https://www.proshares.com/funds/spxt_da ... dings.html
Yeah, FANG isn't necessarily Technology. Amazon is Consumer and Tesla is being added to that.

You can build up the using SPDR Sector funds, but same issue as FANG is distributed across sectors.
https://www.sectorspdr.com/sectorspdr/t ... or-tracker

Facebook Alphabet Netflix - Communications
Apple Microsoft - Technology
HawkeyePierce wrote: Wed Nov 18, 2020 11:57 pm Far easier to simply dilute with international or small-caps.
Not so simple as that doesn't eliminate much of the concentration. If you did 50/50 SP500/[international | small cap], that only dilutes the concentration by half, and it dramatically alters you investment strategy. The concentration risk maybe worse if both spouses worked for FANG and/or held employee stock or options.

Is Motif Investing still around? I can't get to their website.
https://www.motifinvesting.com/

Motif Investing - own the S&P500 for less
viewtopic.php?f=10&t=145659

Looks like they moved to FolioInvesting.com - don't know if they can do individual motifs the same way
https://web.archive.org/web/20200529112 ... sting.com/

https://www.folioinvesting.com/folioinvesting/home/
120+ pre-made thematic portfolios Ready to Go™ Folios
Dollar-based and fractional share trading – buy partial shares of any available security, so you can own what you want regardless of share price
Socially responsible investing filters, sector and security exclusions
https://info.folioinvesting.com/welcome-motif
Last edited by inbox788 on Thu Nov 19, 2020 9:35 am, edited 1 time in total.
UpperNwGuy
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Re: Any way to exclude FAANG company from S&P index fund?

Post by UpperNwGuy »

OP, you really can't hold an S&P index fund without holding the companies within it. Have you considered holding the Extended Market Index Fund along with a few non-FAANG sector funds instead? It's a pretty severe tilt, but I don't know how else to accomplish your goal.
000
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Re: Any way to exclude FAANG company from S&P index fund?

Post by 000 »

kleiner wrote: Thu Nov 19, 2020 5:19 am
000 wrote: Thu Nov 19, 2020 12:11 am SPXT excludes some of them.
Thanks - this is exactly what I was looking for!
Great. I hope you looked at the top holdings - as others noted above, this fund includes some big name stocks that used to be part of the GICS Tech sector.
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1789
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Re: Any way to exclude FAANG company from S&P index fund?

Post by 1789 »

flybird145 wrote: Wed Nov 18, 2020 11:46 pm Hi everyone,

Are there any funds that consist of an index fund that tracks S&P but without specific tech companies in there? For example, if someone worked at Microsoft, it might be prudent for them to avoid buying any extra Microsoft stock since they receive that as compensation, and their job is tied to the company's performance.

Or, some of us may not really be interested in owning Tesla stock once that, too, becomes part of S&P 500.

Any ideas / solutions?
Hi flybird145

The more i read about investing the more i understand that we are lost in little details most of the time. I doubt it would change anything if you come up with a strategy and skip some of the companies in the index. Good luck in your search.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)
SovereignInvestor
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Re: Any way to exclude FAANG company from S&P index fund?

Post by SovereignInvestor »

See what you're trying to do but clear way is long SPX index and short the individual stock. But usually stock agreement plans with companies don't allow employees to short to hedge their stock.

If MSFT got hammered its likely their profits would go to another SPX component or batch of components...this probably true of AMZN, probably go to other retailers, or AAPL, or NFLX.
DVMResident
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Re: Any way to exclude FAANG company from S&P index fund?

Post by DVMResident »

One could hold mid-caps (VIMSX) for their USA position.

See Mel’s posts on mid-caps. You’d avoid FAANG and now Tesla for dirt cheap.
Topic Author
flybird145
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Re: Any way to exclude FAANG company from S&P index fund?

Post by flybird145 »

DVMResident wrote: Fri Nov 20, 2020 6:52 am One could hold mid-caps (VIMSX) for their USA position.

See Mel’s posts on mid-caps. You’d avoid FAANG and now Tesla for dirt cheap.
Thank you, I'll take a look. Might start just buying new equities in that class...
kbjeffrey
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Re: Any way to exclude FAANG company from S&P index fund?

Post by kbjeffrey »

By chance the Animal Spirits podcast recently had an episode about "Direct Indexing." It seems to do what you're asking and I got the impression that you'd have to work with advisor to get access to it. Probably not worth your while, but still interesting.
Hiker8
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Re: Any way to exclude FAANG company from S&P index fund?

Post by Hiker8 »

flybird145 wrote: Wed Nov 18, 2020 11:46 pm Hi everyone,

Are there any funds that consist of an index fund that tracks S&P but without specific tech companies in there? For example, if someone worked at Microsoft, it might be prudent for them to avoid buying any extra Microsoft stock since they receive that as compensation, and their job is tied to the company's performance.

Or, some of us may not really be interested in owning Tesla stock once that, too, becomes part of S&P 500.

Any ideas / solutions?
I think you are over complicating things. Why go through the extra work to remove a stock from an index? If you want to reduce exposure across all the FAANGs I guess that could be more reasonable but a single company? if you have a long term investment horizon, just let the index do its thing and gradually adjust its holdings. The top % of companies in the index has gradually shifting over time, so you shouldn’t don’t need to worry about single stock exposure. Just my two cents. Apologize for not specifically answering your question.
Outer Marker
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Re: Any way to exclude FAANG company from S&P index fund?

Post by Outer Marker »

The Vanguard Value Index may be the fund you're looking for. https://investor.vanguard.com/mutual-fu ... olio/vviax

I put a large chunk in a month ago, looking to avoid the high flying FAANG stocks. It has been well rewarded.

Note the top 10 holdings do not include any FAANG:

Berkshire Hathaway Inc.
Johnson & Johnson
Procter & Gamble Co.
JPMorgan Chase & Co.
UnitedHealth Group Inc.
Verizon Communications Inc.
Walt Disney Co.
Pfizer Inc.
Walmart Inc.
Comcast Corp.
wickywack
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Re: Any way to exclude FAANG company from S&P index fund?

Post by wickywack »

Another option is something like Wealthfront's direct indexing. They emulate the S&P 500 via individual stocks but allow you exclude specified tickers. Note, if you go this route, you'd own hundreds of individual stocks. WF would manage it, but I imagine it'd be messy if you wanted to move away from them, especially in a taxable account.
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