Q&A

"The Technology 500 Index's objective is to mirror the market’s technology sector in the same way that the S&P index mirrors the general market." ​

                                            -Peter Walker, founder of World Capital Management

Why invest in technology?

Why do we like technology?  It's because we believe technology companies are going to continue to be the driving force of tomorrow's economy. 

Amazon, Apple, Google, and Facebook are examples of technology companies that now dominate their markets, and by doing so, have become some of the largest companies in the world.

All these companies use new technologies to establish businesses that previously did not exist.  Their dedication to innovation also helps drive their investment growth.

We believe investments focused on technology will continue to offer the fastest path to wealth creation.  Innovation drives competition, efficiency, lower cost, and improved products and services.

Historically technology companies have had the highest rates of growth but today’s market lacks a truly, broad-based technology index.  That’s why we created the Technology 500 Index.  

What evidence do you have that investing in technology can provide higher investment returns than other investment options?

Of the 15 investment sectors tracked by Morningstar , the technology sector has produced the highest investment returns over the past 3 & 5 years.*

Today there are thousands of technology companies that have the potential to become tomorrow's market leaders.   As an investor, the question is how to profit from their future success.  

  

When it comes to investing in the technology sector, what do you believe is the best investment strategy?

At WCM we believe in a highly diversified approach.  Most technology index funds only invest in a few dozen technology companies.  We take a "fund of funds" approach.  Instead of buying a single ETF technology index, we invest in as many as a dozen ETFs.   Our portfolios hold hundreds of innovative companies of all sizes and industries.  

This approach enables us to expand our portfolio investments to cover a broad assortment of companies across many fields of innovation.   Our goal is to spread our investment dollars to mirror the growing technology sector.  Most technology funds fail to diversify enough to take advantage of the enormous opportunities in today's fast-changing market.

Do you actively trade your ETF technology indexes?

No, we do not actively manage our ETFs.  A long-term study by Standard & Poors supports a buy and hold strategy using a broad index of stocks over trying to actively manage a more focused stock portfolio with few companies.  Several conclusions from the S&P study are that market price movements are most likely random, trading the portfolio lowers returns by adding commissions, and that trading a portfolio more often leads to missed opportunities. 


That's not to say that we might make changes periodically if we believe there is an overwhelming reason to make adjustments.   

How do you implement your strategy?

We use ETFs (Exchange Traded Funds).  An exchange-traded fund is an investment fund traded on stock exchanges, much like stocks.  

Why do you invest using ETF's?

ETFs give us an effective way to own a broad basket of technology companies.  ETFs also have the advantages of liquidity, low administration cost, and ease of trade execution.

 

To help maximize our exposure to the tech sector we buy as many as a dozen technology ETF indexes.  This is often referred to as an "index of indexes" or "fund of fund" investment approach.  By investing in multi-tech indexes simultaneously, the net effect is that we own a very broad spectrum of companies and technologies.

How do you identify which technology ETFs to buy?

 

Currently, there are over 1,700 ETF’s traded in the US.  WCM actively analyzes over 100 ETF’s that are concentrated in the technology sector.

 

Our technology ETF selection attempts have a high correlation with the S&P 500 and Nasdaq indexes.  The closer our technology portfolio's fluctuation is to these 2 indexes, the greater our confidence is that our ETF selection represents the general market. 

Our goal is to mirror the performance of the overall technology sector.  Since the technology sector has historically done better than  the S&P and Nasdaq, we expect better relative returns in the long run.*

What are your typical portfolios holdings?
 

Our tech portfolio consists of between 8 and 12 ETF’s with an average market cap size of about $4.5 billion.  Our total holdings consist of about 500 companies in over 20 technology sectors.


Why would you want to buy ETFs when many tech companies don't make a profit?

 

Unprofitable technology companies can still generate substantial returns for investors.  Amazon, Tesla, Uber, and IBM, are companies that appear unprofitable but maintain a huge market value. Today, buying companies based on market share is often far more important than earnings.  Profit is secondary to expanding and controlling their market.  

What kind of technologies do your portfolios include?

 

Our portfolios try to maximize our technology diversity and avoid over-concentration.

 

The types of technologies our portfolio hold may include genomics testing, medical imaging, machine learning, artificial intelligence, healthcare, sensing & tracking, warehouse automation, software, computers, drones, cleantech, advanced materials, digital securities, electric vehicles, renewable energy, social media, blockchains, robots, cyber securities, plus many others.  The word "technology" has a broad meaning so we want to own companies dominating their market by offering novel innovations. 

What other tools do you use to manage your portfolios?

We occasionally rebalance our positions by reallocation money to ETFs with higher relative strength performers.   Owning ETF's with high relative is critical for above-average performance.

For investors seeking more conservative portfolios, we also can use Modern Portfolio Theory (MPT) algorithms to allocation investments to bonds or lower portfolio risk levels. For example, if a client wants to have income and wants to include bonds, we would apply MPT analysis to determine the portfolios best allocation.

Do you manage accounts separately?

Yes, all our accounts are managed separately.

How long is your investment horizon?

We recommend that investors maintain a longer-term investment horizon.  Some clients might choose to use dollar-cost averaging when initially establishing the portfolio.  In some cases, we might use US Government T-Bills to adjust the portfolio's volatility.

What if I have questions additional questions?

To get started please call us at 1-415-386-7111 or email us at info@WorldCapitalManagement.Org

*Past Performance is not a guarantee of future returns.

©2019 by WCM