Sector Investing Made Easy

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Quote

“You don't have to be brilliant, only a little bit wiser than the other guys, on average, for a long, long time.” – Charlie Munger

Sector Investing Made Easy

Today we are going to cover five sector-specific ETFs that might be worth checking out for your portfolio.

Sector ETFs are great as you can invest in a group of companies, and not worry about trying to pick the best one or two.

Let’s get into it.

VDE - Energy

Vanguard’s energy ETF offers investors exposure to some of the world’s largest oil producers. If you have ever said “Drill baby drill,” then you will probably like this fund.

Essentially, companies inside of VDE are in some way tied to the oil industry whether that is through the actual drilling, providing equipment, refining, or transporting of oil and gas products.

Recent performance isn’t the best, but the energy sector is known for its drastic swings. I’m not a fan of timing the market, but picking this one up at historical lows could treat you well.

Quick Facts

Inception Date: 2004

30 Day Div Yield: 3.2%

3 Year Average Annual Return: 50.4%

5 Year Average Annual Return: 8.5%

10 Year Average Annual Return: 3.4%

Top 5 Holdings: Exxon, Chevron, ConocoPhillips, EOG Resources, Schlumberger

VFH - Financials

Recently we have had a ton of drama around bank failures thanks to SVB fumbling billions of dollars. During this fiasco, there was a lot of chatter about what banks should be saved by the government. Does the phrase “too big to fail” ring a bell?

Well, those are the majority of banks held in VFH. These are the big dogs of banking, consumer finance, corporate lending, insurance, and brokerage services.

Quick Facts

Inception Date: 2004

30 Day Div Yield: 2.6%

3 Year Average Annual Return: 18.4%

5 Year Average Annual Return: 4.7%

10 Year Average Annual Return: 9.7%

Top 5 Holdings: JPMorgan, Berkshire Hathaway, Bank of America, Wells Fargo, Morgan Stanley

VHT- Health Care

The reward for the most underrated ETF on this list goes to VHT in my opinion. One look at the chart and you can see why that claim at least makes a bit of sense.

As you’d expect VHT is made up of companies involved with biotech, health care services/equipment, and the research and development of pharmaceuticals. These companies take a back seat to the big tech names in the major indexes, but VHT can be a solid way to diversify a bit and increase exposure.

Quick Facts

Inception Date: 2004

30 Day Div Yield:1.38%

3 Year Average Annual Return: 14.3%

5 Year Average Annual Return: 10.9%

10 Year Average Annual Return: 12.7%

Top 5 Holdings: UnitedHealth Group, Johnson & Johnson, AbbVie, Merck & Co, Eli Lilly & Co.

VIS - Industrials

Industrials…that sounds boring. Then one sees that VIS has averaged 9.2% annually since its inception in 2004 and it suddenly becomes the cool kid on the block.

VIS holds a number of companies involved with manufacturing, transportation, and distribution of goods. 18% of the fund is composed of businesses in the aerospace & defense industry so if you like things that fly fast and go boom, VIS offers that exposure.

Quick Facts

Inception Date: 2004

30 Day Div Yield: 1.3%

3 Year Average Annual Return: 21.6%

5 Year Average Annual Return: 8.2%

10 Year Average Annual Return: 10.9%

Top 5 Holdings: Raytheon, United Parcel Service, Honeywell, Union Pacific, Caterpillar.

VGT - Tech

“That guy” has just entered the building, introducing VGT. Vanguard’s tech ETF is arguably the most popular fund on this list. For good reason as it has racked up some significant returns over the last decade.

It doesn’t take a genius, but VGT consists of companies involved with tech, hardware, software, and semiconductors. One important thing to remember is Apple and Microsoft make up about 40% of the holdings. Keep that in mind if you are dumping cash into this ETF.

Other options to consider for tech exposure are QQQM, QQQJ, and SMH (semiconductors).

Quick Facts

Inception Date: 2004

30 Day Div Yield: 0.8%

3 Year Average Annual Return: 23%

5 Year Average Annual Return: 18.8%

10 Year Average Annual Return: 19.5%

Top 5 Holdings: Apple, Microsoft, NVIDIA, Visa, Mastercard

Conclusion

Today’s investing environment is tough as a company’s outlook can change in a matter of hours. We see examples of this all the time where a single tweet swings the price of a stock by tens of percent.

That’s why sector ETFs are so helpful, as you can get exposure to a specific set of businesses, but not be SOL if one decides to try and create the next metaverse.

A little rule that I stick with,

When in doubt, ETF it out.

Thanks for reading, Cade.

Cade's Finds

FDIC vs SIPC Insurance - With all the talk about money market accounts and their yields (currently over 4%), here is a good post on the difference between FDIC and SIPC insurance.

Whoops We Built A Company - Cool post that breaks down 8 businesses started by accident. (Guinness Book of World Records, Kingsford Charcoal, and more)

Invest In Luxury - Reminder to check out Wander. Engaging with sponsors is a real bro move, as it helps ya boy afford the tools to create this email.

Best Memes

One more request and this guy is going to pull the plug on Twitter.

We’ve all been in those meetings.

Nothing in this email is intended to serve as financial advice. Do your own research. Thanks for reading, if you have any questions, comments, suggestions, etc. about the email don’t hesitate to send me a reply.