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Avoiding another tech bubble through ETFs
As technology continues to be the fastest growing sector globally, investors worried about another dot.com boom have been advised to look at technology ETFs instead of trying to pick individual winners, suggests an industry expert.
Avoiding another tech bubble through ETFs
As technology continues to be the fastest growing sector globally, investors worried about another dot.com boom have been advised to look at technology ETFs instead of trying to pick individual winners, suggests an industry expert.
In a conversation with nestegg, BetaShares CEO Alex Vynokur explained how an ETF can protect against the losing shares and how technology can revolutionise the Australian economy.
The CEO explained picking the one or two winners from the current technology boom is difficult and that an ETF can simplify the process for investors.
“I think the important message here is in a diversified portfolio of technology companies, your risks are significantly diversified. And you don’t have that problem of having all of your eggs in one basket, basically,” Mr Vynokur said.
“Not every idea is a success, and not every business will be worth billions of dollars, but what is important is the sector as a whole, which is growing significantly.”
Mr Vynokur also believes as the Australian economy diversifies away from the big four banks and the mining companies, investors have an opportunity to cash in.
“If you look at the performance over the last six years, the S&P ASX Australian technology index has returned 16.6 per cent per annum compared with returns from the ASX 200 of 9.3 per cent per annum.
“It’s a very significant outperformance over a pretty long period return.”
The ETF provider stated investors looking to diversify away from blue chips and gain stronger growth should look into the tech sector.
“This is a sector which is a fantastic complement to a traditional existing portfolio because it can really provide genuine access to growth which ultimately any investor in equities is seeking,” Mr Vynokur said.
Finally, the fund manager believes by having an Australian index for technology, it will help support the economy at large.
My Vynokur concluded: “It will absolutely provide additional attention and additional focus on the potential of the Australian technology index; it will provide an additional source of capital, to the companies, to our constituents of the index, and ultimately, it will provide more investment dollars into the industry.
“This will result in more jobs. Technology contributes $22 billion to our economy. According to minister Karen Anderson, the Minister for Industry, Science and Technology, it has the potential to generate an additional 50 billion per annum. It’s employing over 720,000 Australians today. And it’s got a phenomenal future.”
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