Out of the top ETFs why isn't everyone just choosing SCHG or VGT

[Noobiedude]

Hello,

I am looking to invest 80% of my portfolio into one ETF to sit and forget.. possibly doing a Roth IRA.
After doing research, despite the volatility of investing in a growth ETF like VGT they all still follow the same pattern as the rest.

If you're setting and forgetting why wouldn't everyone do the same?

[Image link reformatted by moderator oldcomputerguy]

[bombcar]

Because VGT is tech and tech has been on a twenty year tear.

VTI guarantees whatever is the next tear will be something you own.

But let’s say you need to “save 10%” to make your retirement goals with a stable and boring 3 fund portfolio.

If you want to throw some percentage on top of that into a sector play, VGT would be fine.

But if you used VGT as your “stock” fund, you might need to put more cash into it, because you could be buying in 1999.

Or another way - past overperformance is no proof of future good results.

And as you can see, sectors have short periods where they jump, and then long periods being in sync. Well they can also have short periods where they sink, and then get in sync.

[LiveSimple]

OP, you have to read research and make your own choices if you do want to deviate your portfolio from the common knowledge…

This is hiking a new trail on your own… it will work for you or not but you decided… based on your research and conviction…

[ScubaHogg]

“Return chasing” is the term you are looking for

And unless you think “information technology” will eventually represent 100% of world GDP, you can see quickly why you shouldn’t do it

[retired@50]

If you're setting and forgetting why wouldn't everyone do the same?

Because it's not guaranteed to work.

Consider the Fidelity Magellan Fund (FMAGX). Back in the 1970s and 1980s it was a true standout. See charts below. From 1976 to 1996 it beat the new S&P 500 Index fund from Vanguard (VFINX) by a mile. So, why wouldn't everyone just pile into the Fidelity Magellan fund? From 1996 to current day, it's trailed the S&P 500 fund.

Picking the fund(s) that have been hot in the past is easy. Picking the fund that will be hot the next 20 or 30 years is nearly impossible.

1976 to 1996


1996 to 2025


Regards,

[Target2019]

Five years is not the entire story. Take your chart back far enough to capture the dot com crash, for example.

[Noobiedude]

" Ah I see!" said the blind man.

Given this information. Is there an ETF that is diversified that still has a good chunk of tech without it being something like QQQ?
VTI just seems too general and profits could be made elsewhere but who knows...

[retired@50]

" Ah I see!" said the blind man.

Given this information. Is there an ETF that is diversified that still has a good chunk of tech without it being something like QQQ?
VTI just seems too general and profits could be made elsewhere but who knows...

VOO has plenty of tech and is diversified.

By using VOO (an S&P 500 index fund) you're relying on the Standard & Poor's company to select and update which companies are "in" the 500 and which are "out" based on their criteria for inclusion / exclusion. Some folks consider this "active" management, but it's also very tax efficient and hard to out-perform.

VTI just buys everything. This is true diversification without applying any "criteria". Truly an agnostic approach to company selection.

If you have any strongly held beliefs about which companies / sectors / etc. will do better over your investing lifetime, then maybe just commit 10% of your investments to those beliefs. You'll either be right or wrong, but it shouldn't be enough to derail your retirement plans if you're wrong.

Regards,

[WeakOldGuy]

" Ah I see!" said the blind man.

Given this information. Is there an ETF that is diversified that still has a good chunk of tech without it being something like QQQ?
VTI just seems too general and profits could be made elsewhere but who knows...

VTI IS general! It, and other ETFs/Funds like it try to capture the entire market. That is the point of a cap-weighted index. What you seem to believe is that since Tech has done well in recent years, that it will continue to out-perform the overall market going forward. It that is what you think, then definitely tilt your portfolio to tech funds. However, most folks that have been investing for more than a decade or two, realize that what we think is going to be "hot" won't be down the road. You want a single ETF to set and forget. That is what a cap-weighted total market index is designed for.

Take a look at the table you posted and look at the PE ratio for all of those ETFs. That alone would give me pause.

[sycamore]

If you're setting and forgetting why wouldn't everyone do the same?

Suggest you put more thought into this.

The price of a stock is determined in the marketplace of many different buyers & sellers.

Only some of them are "set and forget". There's also those who are in for a quick buck. Or those who are buying only certain kinds of stocks (sector, dividends, large/small, growth/value, whatever). Or those who are shorting stocks.

Each group has its own goals, investing horizon, and hopes & dreams & fears & biases, and they're not the same as yours or anyone else's. Another relevant question is how much money is being risked by each group?

If you find yourself thinking "why doesn't everyone do X" it's because there really is no "everyone". Investors are not so homogenous.

None of this means your portfolio should not have growth tilt. Just that you should not rationalize such a portfolio by thinking "everyone does this so it's bound to keep going up".

[snic]

" Ah I see!" said the blind man.

Given this information. Is there an ETF that is diversified that still has a good chunk of tech without it being something like QQQ?
VTI just seems too general and profits could be made elsewhere but who knows...

If everyone knew where those profits could be made, we'd all be buying that investment.

Because we don't know, we buy VTI.

If you think you know, go ahead and buy that investment. But the chances are that you actually don't know, and your investment will not outperform VTI in the long term.

All this is covered in the several excellent books on the Boglehead approach to investing.

[Noobiedude]

Thank you. Yes past performance does not guarantee future growth!

It seems like VOO would be the right choice for a more aggressive approach that isn't as tech weighted as some of the others, VTI is a nice safe bet it seems.

I've been reading about VONG too which seems to be out performing VOO but you never know. I say better safe than sorry. Thank you all for your thoughtful and appreciate insight!

[Dottie57]

Tech will have bad days. Or years. Or decades.

[arcticpineapplecorp.]

Thank you. Yes past performance does not guarantee future growth!

It seems like VOO would be the right choice for a more aggressive approach that isn't as tech weighted as some of the others, VTI is a nice safe bet it seems.

well it will be less tech than vug, vong and qqq for sure, but it contains 30% information technology so it's still tech heavy, but it is what the market has decided in aggregate. If you want to diversify you should own total international as well, which, because that portfolio composition is less weighted to tech (just 13.73%) and more to financials.

If you have a 60/40 US/INT split that would be (.60 x .30) + (.50 x .1373) = 24.8% tech.

If you further diversify by holding bonds then say you have a 60/40 stock/bond mix (using the 60/40 US/INT above) then you'd only have:

(.60 x .248) = 14.9% of your whole portfolio in tech.

see how diversification in total markets (outside US and also holding bonds) helps reduce concentration risk?

I've been reading about VONG too which seems to be out performing VOO but you never know.

has outperformed. Make sure when you're talking about investments you're speaking in the past tense. When you say "is outperforming" you're assuming the same for the future as has been true of the past. Usually the opposite is true. For instance, VONG is a growth stock index fund and it's outperfomed because growth has beaten value, but when value beats growth you will not be as keen on VONG, will you?

the beauty of owning the market is it contains growth and value, large, mid and small and all sectors according to how everyone in aggregate has decided to own them. So unless you know something the market doesn't, what makes you think there's a better strategy than just owning the market? Of course there likely is something that will be better, but the problem is you can't know that in advance.

[nisiprius]

I really need to start tallying. I am flabbergasted by the roughly equal number of posts we have been getting from people who think there's too much tech in the Total Market or the S&P 500 and are looking for a way to reduce, and the number who think there isn't enough and are looking for a way to increase it.

[asset_chaos]

As the subset of the market that won yesterday is not guaranteed to be the chunk of the market that wins tomorrow, a lot of people want more diversification. As I'm included in the set of everyone, I know that's how I think.