Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

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Topic Author
quuzuu
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Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

Post by quuzuu »

I love big tech stocks but they're in different sectors, so I buy QQQ manually on every paycheck day, and I've been doing it for many years. It's good, but tiresome. I want setup auto purchase.

Auto purchase can't be setup on an ETF, so I guess I need find a fund to replace QQQ, so I've looked into:

1. VITAX (fund of VGT):
con: lacks Google Facebook Amazon Tesla etc.

2. USNQX (USAA NASDAQ-100 Index Fund):
con: expensive fees (0.5%)

3. FNCMX (Fidelity® NASDAQ Composite Index® Fund):
con: seems to performs significantly worse than QQQ, no idea way, maybe because it's total index as opposed to 100 index.

So, can someone recommend a way to set up auto invest on either Nasdaq or "all big tech companies"? Thanks!

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Last edited by quuzuu on Thu Jan 27, 2022 12:43 pm, edited 5 times in total.
Topic Author
quuzuu
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Re: Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

Post by quuzuu »

No replies, weird, I would've thought it's a very common question.
000
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Re: Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

Post by 000 »

M1 Finance has automatic investment in ETFs.
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calmaniac
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Re: Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

Post by calmaniac »

Welcome to Bogleheads! Lots to learn here that will serve you well.

A gamble on what was big over the past 20 years continuing to roll on for another 20. Hmmm...what could go wrong? OK, enough with my curmudgeonly antics. Here goes.

Could try iShares NASDAQ 100 ETF.

iShares site

It follows the Nasdaq-100 Index, which is designed to measure the performance of 100 of the largest Nasdaq-listed non-financial companies. Expense ratio 0.28%

Top 20 holdings below (or check out the Portfolio tab on the Morningstar page):
Apple Inc
Microsoft Corp
Amazon.com Inc
Meta Platforms Inc Class A
Tesla Inc
Alphabet Inc Class C
NVIDIA Corp
Alphabet Inc Class A
Adobe Inc
Cisco Systems Inc
PepsiCo Inc
Comcast Corp Class A
Broadcom Inc
Costco Wholesale Corp
Intel Corp
PayPal Holdings Inc
Qualcomm Inc
Netflix Inc
Texas Instruments Inc
Intuit Inc

Not my cup of tea and wouldn't recommend, but be my guest to invest. In the apocryphal words of hockey great Wayne Gretzky: "I skate to where the puck is going to be, not where it has been."

Please check out the Bogleheads® investment philosophy wiki. Literally, worth its weight in gold.
"Pretired", working 20 h/wk. AA 75/25: 30% TSM, 19% value (VFVA/AVUV), 18% Int'l LC, 8% emerging, 25% GFund/VBTLX. Military pension ≈60% of expenses. Pension+SS@age 70 ≈100% of expenses.
exodusNH
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Re: Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

Post by exodusNH »

quuzuu wrote: Mon Jan 24, 2022 4:36 pm I love big tech stocks but they're in different sectors. For many years I've been buying QQQ manually on every paycheck day, it's good, but tedious. I want to find a way to setup auto purchase.

I've looked into:

1. VITAX (fund of VGT):
Lacks Google Facebook Amazon Tesla etc.

2. USNQX (USAA NASDAQ-100 Index Fund):
expensive fees (0.5%)

3. FNCMX (Fidelity® NASDAQ Composite Index® Fund):
Seems to performs significantly worse than QQQ, no idea way.

Can someone recommend a good way to set up monthly auto invest on either Nasdaq or "all big tech companies"?

Image
You're only looking at 5 years. If you compare just QQQ and S&P 500, you'll see they returned about the same amount, with QQQ being much more volatile.
binkding
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Re: Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

Post by binkding »

There are brokerages that'll do for you for a tiny expense. Easier for you to click the buy button.
Topic Author
quuzuu
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Re: Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

Post by quuzuu »

calmaniac wrote: Tue Jan 25, 2022 9:16 pm Welcome to Bogleheads! Lots to learn here that will serve you well.

A gamble on what was big over the past 20 years continuing to roll on for another 20. Hmmm...what could go wrong? OK, enough with my curmudgeonly antics. Here goes.

Could try iShares NASDAQ 100 ETF.

iShares site

It follows the Nasdaq-100 Index, which is designed to measure the performance of 100 of the largest Nasdaq-listed non-financial companies. Expense ratio 0.28%

....
Hi calmaniac thanks for your reply, but the ETF your shared was an ETF, which is not so different from QQQ which doesn't solve my question? (I wanted to set up auto investment)
exodusNH
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Re: Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

Post by exodusNH »

quuzuu wrote: Wed Jan 26, 2022 10:19 am
calmaniac wrote: Tue Jan 25, 2022 9:16 pm Welcome to Bogleheads! Lots to learn here that will serve you well.

A gamble on what was big over the past 20 years continuing to roll on for another 20. Hmmm...what could go wrong? OK, enough with my curmudgeonly antics. Here goes.

Could try iShares NASDAQ 100 ETF.

iShares site

It follows the Nasdaq-100 Index, which is designed to measure the performance of 100 of the largest Nasdaq-listed non-financial companies. Expense ratio 0.28%

....
Hi calmaniac thanks for your reply, but the ETF your shared was an ETF, which is not so different from QQQ which doesn't solve my question? (I wanted to set up auto investment)
If you go back more than 5 years, you will find QQQ and S&P 500 have basically the same returns. Just invest in a low-cost S&P 500 fund and forget about it. (In fact, the 500 has done slightly better and been less volatile.)

5 years is a trivial amount of time to be comparing stock returns.
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retired@50
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Re: Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

Post by retired@50 »

000 wrote: Tue Jan 25, 2022 8:19 pm M1 Finance has automatic investment in ETFs.
You can also create a custom pie at M1.
https://support.m1finance.com/hc/en-us/ ... stom-Pies-

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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Re: Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

Post by KyleAAA »

exodusNH wrote: Tue Jan 25, 2022 10:41 pm
quuzuu wrote: Mon Jan 24, 2022 4:36 pm I love big tech stocks but they're in different sectors. For many years I've been buying QQQ manually on every paycheck day, it's good, but tedious. I want to find a way to setup auto purchase.

I've looked into:

1. VITAX (fund of VGT):
Lacks Google Facebook Amazon Tesla etc.

2. USNQX (USAA NASDAQ-100 Index Fund):
expensive fees (0.5%)

3. FNCMX (Fidelity® NASDAQ Composite Index® Fund):
Seems to performs significantly worse than QQQ, no idea way.

Can someone recommend a good way to set up monthly auto invest on either Nasdaq or "all big tech companies"?

Image
You're only looking at 5 years. If you compare just QQQ and S&P 500, you'll see they returned about the same amount, with QQQ being much more volatile.
That appears to be false. Since inception, QQQ has outperformed VFINX by more than 2% per year. And since QQQ opened in 1999, that means it include the impact of the tech bust.

https://www.portfoliovisualizer.com/ass ... &months=36
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burritoLover
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Re: Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

Post by burritoLover »

There's no reason to tilt towards QQQ or to expect that tech will higher returns going forward. Picking what has performed well recently and expecting it to continue to outperform is a poor strategy.
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Re: Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

Post by bertilak »

Two issues here:

1. Is it a good idea? You didn't ask that although most of the replies addressed that issue.

2. How to set up automatic investment? That depends on whatever brokerage you are using. That's the kind of thing they do. It you are talking 401(k) (or similar) you need to talk to the sponsor of the plan.

Automatic investing is a great idea. Most employers have some kind of plan for that. I would not call it DCA as DCA implies holding back investible money (to delay near-term losses) and trickling it in over time. What you are talking about is regular (aka "paycheck") investing. Here, money does "trickle in" but there is no holding back -- all money available is invested as it becomes available. It just happens to become available in a trickle (each paycheck). That's life and not some special investment sauce.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet
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calmaniac
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Re: Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

Post by calmaniac »

quuzuu wrote: Wed Jan 26, 2022 10:19 am
Hi calmaniac thanks for your reply, but the ETF your shared was an ETF, which is not so different from QQQ which doesn't solve my question? (I wanted to set up auto investment)
I didn’t realize you couldn’t auto invest in ETFs. Interesting. Amazing, that with all that FinTech at Schwab & Fidelity, they don’t have auto invest as a feature.
"Pretired", working 20 h/wk. AA 75/25: 30% TSM, 19% value (VFVA/AVUV), 18% Int'l LC, 8% emerging, 25% GFund/VBTLX. Military pension ≈60% of expenses. Pension+SS@age 70 ≈100% of expenses.
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Re: Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

Post by indexfundfan »

calmaniac wrote: Wed Jan 26, 2022 12:27 pm
quuzuu wrote: Wed Jan 26, 2022 10:19 am
Hi calmaniac thanks for your reply, but the ETF your shared was an ETF, which is not so different from QQQ which doesn't solve my question? (I wanted to set up auto investment)
I didn’t realize you couldn’t auto invest in ETFs. Interesting. Amazing, that with all that FinTech at Schwab & Fidelity, they don’t have auto invest as a feature.
Other than the fintechs, you can get automatic ETF investing at Etrade.
My signature has been deleted.
exodusNH
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Re: Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

Post by exodusNH »

KyleAAA wrote: Wed Jan 26, 2022 11:30 am
exodusNH wrote: Tue Jan 25, 2022 10:41 pm
quuzuu wrote: Mon Jan 24, 2022 4:36 pm I love big tech stocks but they're in different sectors. For many years I've been buying QQQ manually on every paycheck day, it's good, but tedious. I want to find a way to setup auto purchase.

I've looked into:

1. VITAX (fund of VGT):
Lacks Google Facebook Amazon Tesla etc.

2. USNQX (USAA NASDAQ-100 Index Fund):
expensive fees (0.5%)

3. FNCMX (Fidelity® NASDAQ Composite Index® Fund):
Seems to performs significantly worse than QQQ, no idea way.

Can someone recommend a good way to set up monthly auto invest on either Nasdaq or "all big tech companies"?

Image
You're only looking at 5 years. If you compare just QQQ and S&P 500, you'll see they returned about the same amount, with QQQ being much more volatile.
That appears to be false. Since inception, QQQ has outperformed VFINX by more than 2% per year. And since QQQ opened in 1999, that means it include the impact of the tech bust.

https://www.portfoliovisualizer.com/ass ... &months=36

https://www.portfoliovisualizer.com/bac ... ion2_2=100

They're within 0.2% with the 500 being much less volatile.
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Re: Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

Post by KyleAAA »

exodusNH wrote: Wed Jan 26, 2022 1:45 pm
KyleAAA wrote: Wed Jan 26, 2022 11:30 am
exodusNH wrote: Tue Jan 25, 2022 10:41 pm
quuzuu wrote: Mon Jan 24, 2022 4:36 pm I love big tech stocks but they're in different sectors. For many years I've been buying QQQ manually on every paycheck day, it's good, but tedious. I want to find a way to setup auto purchase.

I've looked into:

1. VITAX (fund of VGT):
Lacks Google Facebook Amazon Tesla etc.

2. USNQX (USAA NASDAQ-100 Index Fund):
expensive fees (0.5%)

3. FNCMX (Fidelity® NASDAQ Composite Index® Fund):
Seems to performs significantly worse than QQQ, no idea way.

Can someone recommend a good way to set up monthly auto invest on either Nasdaq or "all big tech companies"?

Image
You're only looking at 5 years. If you compare just QQQ and S&P 500, you'll see they returned about the same amount, with QQQ being much more volatile.
That appears to be false. Since inception, QQQ has outperformed VFINX by more than 2% per year. And since QQQ opened in 1999, that means it include the impact of the tech bust.

https://www.portfoliovisualizer.com/ass ... &months=36

https://www.portfoliovisualizer.com/bac ... ion2_2=100

They're within 0.2% with the 500 being much less volatile.
Different starting points. If you just randomly throw away high-performing periods of 1 of the assets of course you can make it look closer than it really is. But returns are lumpy.
exodusNH
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Re: Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

Post by exodusNH »

KyleAAA wrote: Wed Jan 26, 2022 1:47 pm
exodusNH wrote: Wed Jan 26, 2022 1:45 pm
KyleAAA wrote: Wed Jan 26, 2022 11:30 am
exodusNH wrote: Tue Jan 25, 2022 10:41 pm
quuzuu wrote: Mon Jan 24, 2022 4:36 pm I love big tech stocks but they're in different sectors. For many years I've been buying QQQ manually on every paycheck day, it's good, but tedious. I want to find a way to setup auto purchase.

I've looked into:

1. VITAX (fund of VGT):
Lacks Google Facebook Amazon Tesla etc.

2. USNQX (USAA NASDAQ-100 Index Fund):
expensive fees (0.5%)

3. FNCMX (Fidelity® NASDAQ Composite Index® Fund):
Seems to performs significantly worse than QQQ, no idea way.

Can someone recommend a good way to set up monthly auto invest on either Nasdaq or "all big tech companies"?

Image
You're only looking at 5 years. If you compare just QQQ and S&P 500, you'll see they returned about the same amount, with QQQ being much more volatile.
That appears to be false. Since inception, QQQ has outperformed VFINX by more than 2% per year. And since QQQ opened in 1999, that means it include the impact of the tech bust.

https://www.portfoliovisualizer.com/ass ... &months=36

https://www.portfoliovisualizer.com/bac ... ion2_2=100

They're within 0.2% with the 500 being much less volatile.
Different starting points. If you just randomly throw away high-performing periods of 1 of the assets of course you can make it look closer than it really is. But returns are lumpy.
Everything is sensitive to starting dates. Using all available data, they funds have basically performed the same. If you take a step back, that makes sense as tech has dominated the US market.

I stand by my recommendation that using a 500 fund as a proxy for "big tech" is a perfectly sensible option.
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Re: Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

Post by KyleAAA »

exodusNH wrote: Wed Jan 26, 2022 3:17 pm
KyleAAA wrote: Wed Jan 26, 2022 1:47 pm
exodusNH wrote: Wed Jan 26, 2022 1:45 pm
KyleAAA wrote: Wed Jan 26, 2022 11:30 am
exodusNH wrote: Tue Jan 25, 2022 10:41 pm

You're only looking at 5 years. If you compare just QQQ and S&P 500, you'll see they returned about the same amount, with QQQ being much more volatile.
That appears to be false. Since inception, QQQ has outperformed VFINX by more than 2% per year. And since QQQ opened in 1999, that means it include the impact of the tech bust.

https://www.portfoliovisualizer.com/ass ... &months=36

https://www.portfoliovisualizer.com/bac ... ion2_2=100

They're within 0.2% with the 500 being much less volatile.
Different starting points. If you just randomly throw away high-performing periods of 1 of the assets of course you can make it look closer than it really is. But returns are lumpy.
Everything is sensitive to starting dates. Using all available data, they funds have basically performed the same. If you take a step back, that makes sense as tech has dominated the US market.

I stand by my recommendation that using a 500 fund as a proxy for "big tech" is a perfectly sensible option.
But your start date excludes 1999, a year when QQQ returned ~80% even before dividends. Randomly excluding the best year doesn't make sense. And tech may dominate the market now, but it didn't for much of the period. That's because tech has performed so well relative to the market. Nevermind the fact that the NASDAQ contains quite a lot of non-tech companies, so using QQQ as a proxy actually significantly under-estimates tech outperformance.

Indeed, the Fidelity Select Technology Portfolio has data going back to 1982 and it's smashed the S&P 500. One could argue it's a result of active manager skill since it isn't an index fund, but that seems unlikely over a 40 year period with multiple manager changes.

https://fundresearch.fidelity.com/mutua ... /316390202
Topic Author
quuzuu
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Re: Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

Post by quuzuu »

exodusNH wrote: Wed Jan 26, 2022 1:45 pm
KyleAAA wrote: Wed Jan 26, 2022 11:30 am
exodusNH wrote: Tue Jan 25, 2022 10:41 pm
quuzuu wrote: Mon Jan 24, 2022 4:36 pm I love big tech stocks but they're in different sectors. For many years I've been buying QQQ manually on every paycheck day, it's good, but tedious. I want to find a way to setup auto purchase.

I've looked into:

1. VITAX (fund of VGT):
Lacks Google Facebook Amazon Tesla etc.

2. USNQX (USAA NASDAQ-100 Index Fund):
expensive fees (0.5%)

3. FNCMX (Fidelity® NASDAQ Composite Index® Fund):
Seems to performs significantly worse than QQQ, no idea way.

Can someone recommend a good way to set up monthly auto invest on either Nasdaq or "all big tech companies"?

Image
You're only looking at 5 years. If you compare just QQQ and S&P 500, you'll see they returned about the same amount, with QQQ being much more volatile.
That appears to be false. Since inception, QQQ has outperformed VFINX by more than 2% per year. And since QQQ opened in 1999, that means it include the impact of the tech bust.

https://www.portfoliovisualizer.com/ass ... &months=36

https://www.portfoliovisualizer.com/bac ... ion2_2=100

They're within 0.2% with the 500 being much less volatile.
Using your link, I tested 20 different starting point (each year between 2000 and 2020), with the same ending point (2022). The return of QQQ is roughly 2 times SP500.
Topic Author
quuzuu
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Re: Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

Post by quuzuu »

Guys I have a solution! I'll simply setup DCA on any fund, then every once in a while (for instance every quarter) I'll empty than fund into QQQ.

I use vanguard, and vanguard doesn't even allow auto-invest on non-vanguard funds, so I'll just use their sp500 fund or total stock fund.
exodusNH
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Re: Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

Post by exodusNH »

KyleAAA wrote: Wed Jan 26, 2022 3:49 pm
exodusNH wrote: Wed Jan 26, 2022 3:17 pm
KyleAAA wrote: Wed Jan 26, 2022 1:47 pm
exodusNH wrote: Wed Jan 26, 2022 1:45 pm
KyleAAA wrote: Wed Jan 26, 2022 11:30 am

That appears to be false. Since inception, QQQ has outperformed VFINX by more than 2% per year. And since QQQ opened in 1999, that means it include the impact of the tech bust.

https://www.portfoliovisualizer.com/ass ... &months=36

https://www.portfoliovisualizer.com/bac ... ion2_2=100

They're within 0.2% with the 500 being much less volatile.
Different starting points. If you just randomly throw away high-performing periods of 1 of the assets of course you can make it look closer than it really is. But returns are lumpy.
Everything is sensitive to starting dates. Using all available data, they funds have basically performed the same. If you take a step back, that makes sense as tech has dominated the US market.

I stand by my recommendation that using a 500 fund as a proxy for "big tech" is a perfectly sensible option.
But your start date excludes 1999, a year when QQQ returned ~80% even before dividends. Randomly excluding the best year doesn't make sense. And tech may dominate the market now, but it didn't for much of the period. That's because tech has performed so well relative to the market. Nevermind the fact that the NASDAQ contains quite a lot of non-tech companies, so using QQQ as a proxy actually significantly under-estimates tech outperformance.

Indeed, the Fidelity Select Technology Portfolio has data going back to 1982 and it's smashed the S&P 500. One could argue it's a result of active manager skill since it isn't an index fund, but that seems unlikely over a 40 year period with multiple manager changes.

https://fundresearch.fidelity.com/mutua ... /316390202
I went back as far as portfolio visualizer had data for, which is April of 1999. I didn't exclude anything. If their data isn't good, then my conclusion is not valid. But assuming it is, then, for the life of QQQ, is has done only slightly better than the 500 with more volatility. Of course, shifting the start date to AFTER the tech crash will show incredible returns.

20 years from now, if someone inadvertently starts their comparison at April 2020 instead of Jan 2020, the results are going to look fantastic. They will have been blind to the 40% drop a month earlier.

Given that over 75% of QQQ is in the 500, albeit at lower weights, I don't see why you'd take the concentrated risk now. Sure, it may have been a good idea 25 years ago, but the past isn't the future. Talk to everyone who piled into the ARK funds after their run ups.
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Re: Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

Post by burritoLover »

Since there's a big focus on back-testing here - If you want to go back 90 years, large-cap growth has poorer returns than both large-cap blend and large-cap value. And QQQ is full of large cap growth. And shares 7 of the top 10 ten companies by market cap with the S&P 500 so it isn't like only investing in the S&P 500 doesn't give you any large cap growth exposure.
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Re: Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

Post by KyleAAA »

exodusNH wrote: Thu Jan 27, 2022 12:52 pm
KyleAAA wrote: Wed Jan 26, 2022 3:49 pm
exodusNH wrote: Wed Jan 26, 2022 3:17 pm
KyleAAA wrote: Wed Jan 26, 2022 1:47 pm
exodusNH wrote: Wed Jan 26, 2022 1:45 pm


https://www.portfoliovisualizer.com/bac ... ion2_2=100

They're within 0.2% with the 500 being much less volatile.
Different starting points. If you just randomly throw away high-performing periods of 1 of the assets of course you can make it look closer than it really is. But returns are lumpy.
Everything is sensitive to starting dates. Using all available data, they funds have basically performed the same. If you take a step back, that makes sense as tech has dominated the US market.

I stand by my recommendation that using a 500 fund as a proxy for "big tech" is a perfectly sensible option.
But your start date excludes 1999, a year when QQQ returned ~80% even before dividends. Randomly excluding the best year doesn't make sense. And tech may dominate the market now, but it didn't for much of the period. That's because tech has performed so well relative to the market. Nevermind the fact that the NASDAQ contains quite a lot of non-tech companies, so using QQQ as a proxy actually significantly under-estimates tech outperformance.

Indeed, the Fidelity Select Technology Portfolio has data going back to 1982 and it's smashed the S&P 500. One could argue it's a result of active manager skill since it isn't an index fund, but that seems unlikely over a 40 year period with multiple manager changes.

https://fundresearch.fidelity.com/mutua ... /316390202
I went back as far as portfolio visualizer had data for, which is April of 1999. I didn't exclude anything. If their data isn't good, then my conclusion is not valid. But assuming it is, then, for the life of QQQ, is has done only slightly better than the 500 with more volatility. Of course, shifting the start date to AFTER the tech crash will show incredible returns.

20 years from now, if someone inadvertently starts their comparison at April 2020 instead of Jan 2020, the results are going to look fantastic. They will have been blind to the 40% drop a month earlier.

Given that over 75% of QQQ is in the 500, albeit at lower weights, I don't see why you'd take the concentrated risk now. Sure, it may have been a good idea 25 years ago, but the past isn't the future. Talk to everyone who piled into the ARK funds after their run ups.
For the life of the fund, QQQ has outperformed the S&P500 by ~2.2% per year. But anyway, the Fidelity fund is a much better proxy for the performance of the technology sector for a much longer period than QQQ, which has also outperformed the S&P500 by ~2.4% per year since inception in July of 1981. They DEFINITELY have not "basically performed the same."
exodusNH
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Re: Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

Post by exodusNH »

KyleAAA wrote: Thu Jan 27, 2022 3:50 pm
exodusNH wrote: Thu Jan 27, 2022 12:52 pm
KyleAAA wrote: Wed Jan 26, 2022 3:49 pm
exodusNH wrote: Wed Jan 26, 2022 3:17 pm
KyleAAA wrote: Wed Jan 26, 2022 1:47 pm

Different starting points. If you just randomly throw away high-performing periods of 1 of the assets of course you can make it look closer than it really is. But returns are lumpy.
Everything is sensitive to starting dates. Using all available data, they funds have basically performed the same. If you take a step back, that makes sense as tech has dominated the US market.

I stand by my recommendation that using a 500 fund as a proxy for "big tech" is a perfectly sensible option.
But your start date excludes 1999, a year when QQQ returned ~80% even before dividends. Randomly excluding the best year doesn't make sense. And tech may dominate the market now, but it didn't for much of the period. That's because tech has performed so well relative to the market. Nevermind the fact that the NASDAQ contains quite a lot of non-tech companies, so using QQQ as a proxy actually significantly under-estimates tech outperformance.

Indeed, the Fidelity Select Technology Portfolio has data going back to 1982 and it's smashed the S&P 500. One could argue it's a result of active manager skill since it isn't an index fund, but that seems unlikely over a 40 year period with multiple manager changes.

https://fundresearch.fidelity.com/mutua ... /316390202
I went back as far as portfolio visualizer had data for, which is April of 1999. I didn't exclude anything. If their data isn't good, then my conclusion is not valid. But assuming it is, then, for the life of QQQ, is has done only slightly better than the 500 with more volatility. Of course, shifting the start date to AFTER the tech crash will show incredible returns.

20 years from now, if someone inadvertently starts their comparison at April 2020 instead of Jan 2020, the results are going to look fantastic. They will have been blind to the 40% drop a month earlier.

Given that over 75% of QQQ is in the 500, albeit at lower weights, I don't see why you'd take the concentrated risk now. Sure, it may have been a good idea 25 years ago, but the past isn't the future. Talk to everyone who piled into the ARK funds after their run ups.
For the life of the fund, QQQ has outperformed the S&P500 by ~2.2% per year. But anyway, the Fidelity fund is a much better proxy for the performance of the technology sector for a much longer period than QQQ, which has also outperformed the S&P500 by ~2.4% per year since inception in July of 1981. They DEFINITELY have not "basically performed the same."
This is not true if you start from fund inception. QQQ CAGR 7.62 vs 7.41.

However, if you start at 2001, QQQ has a CAGR of 10.32 vs 8.26. The 18 month difference in start dates completely changes the numbers. But that's because it was starting from a low in 1999. That was my point of my comment about comparing returns (of almost any fund) starting from April 2020 instead of Jan 2020.

And even then, the huge growth difference was really the result of the 2020 run up of growth stocks. It certainly doesn't seem likely that's going to repeat.

I don't know anything about the Fidelity fund and so cannot comment.
KyleAAA
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Re: Ways to setup DCA on Nasdaq or DCA on "all big tech companies"?

Post by KyleAAA »

exodusNH wrote: Thu Jan 27, 2022 5:17 pm
KyleAAA wrote: Thu Jan 27, 2022 3:50 pm
exodusNH wrote: Thu Jan 27, 2022 12:52 pm
KyleAAA wrote: Wed Jan 26, 2022 3:49 pm
exodusNH wrote: Wed Jan 26, 2022 3:17 pm

Everything is sensitive to starting dates. Using all available data, they funds have basically performed the same. If you take a step back, that makes sense as tech has dominated the US market.

I stand by my recommendation that using a 500 fund as a proxy for "big tech" is a perfectly sensible option.
But your start date excludes 1999, a year when QQQ returned ~80% even before dividends. Randomly excluding the best year doesn't make sense. And tech may dominate the market now, but it didn't for much of the period. That's because tech has performed so well relative to the market. Nevermind the fact that the NASDAQ contains quite a lot of non-tech companies, so using QQQ as a proxy actually significantly under-estimates tech outperformance.

Indeed, the Fidelity Select Technology Portfolio has data going back to 1982 and it's smashed the S&P 500. One could argue it's a result of active manager skill since it isn't an index fund, but that seems unlikely over a 40 year period with multiple manager changes.

https://fundresearch.fidelity.com/mutua ... /316390202
I went back as far as portfolio visualizer had data for, which is April of 1999. I didn't exclude anything. If their data isn't good, then my conclusion is not valid. But assuming it is, then, for the life of QQQ, is has done only slightly better than the 500 with more volatility. Of course, shifting the start date to AFTER the tech crash will show incredible returns.

20 years from now, if someone inadvertently starts their comparison at April 2020 instead of Jan 2020, the results are going to look fantastic. They will have been blind to the 40% drop a month earlier.

Given that over 75% of QQQ is in the 500, albeit at lower weights, I don't see why you'd take the concentrated risk now. Sure, it may have been a good idea 25 years ago, but the past isn't the future. Talk to everyone who piled into the ARK funds after their run ups.
For the life of the fund, QQQ has outperformed the S&P500 by ~2.2% per year. But anyway, the Fidelity fund is a much better proxy for the performance of the technology sector for a much longer period than QQQ, which has also outperformed the S&P500 by ~2.4% per year since inception in July of 1981. They DEFINITELY have not "basically performed the same."
This is not true if you start from fund inception. QQQ CAGR 7.62 vs 7.41.

However, if you start at 2001, QQQ has a CAGR of 10.32 vs 8.26. The 18 month difference in start dates completely changes the numbers. But that's because it was starting from a low in 1999. That was my point of my comment about comparing returns (of almost any fund) starting from April 2020 instead of Jan 2020.

And even then, the huge growth difference was really the result of the 2020 run up of growth stocks. It certainly doesn't seem likely that's going to repeat.

I don't know anything about the Fidelity fund and so cannot comment.
QQQ from inception is not 7.62%, it's 10.1% as of 12/31. And the question was about the nasdaq, not simply a single ETF started much later. The nasdaq has in fact handily outperformed. They are not even close to being the same performance.

https://screener.fidelity.com/ftgw/etf/ ... ymbols=QQQ
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