Information Technology, Consumer Staples, Emerging Markets

Vanguard Information Technology ETF (VGT):

VGT was created to track and index: “The MSCI US IMI Information Technology 25-50 Gross total return USD Index”. This share class generates a stream of income by distributing dividends. It provides physical exposure to more than 346 holdings, 15 of which account for 67.97%. Apple is VGT’s largest holding at 23.25%, which bodes well for the ETF as the company has a strong financial foundation with growing free cash flow, EBITDA and ROA. However, this ETF is focused on only one country: the US (99.3%), as well as one sector: information technology (99.3%).

What’s good about this ETF:

Global demand for technology products continues to grow as a result of population growth, international trade and the race to be the most developed country. According to the World Economic Forum’s 2018 Global Competitiveness Index, the United States has a competitive advantage thanks to business dynamism, strong institutional pillars, funding mechanisms, and a vibrant innovation ecosystem. Innovation is a hallmark of American competitiveness and can lead the world in generating advanced technologies, and harnessing the full productive capacity of their digital economies can gain a strategic competitive advantage. Digital technologies have risen to prominence as a critical factor in economic growth, national security and international competitiveness. The digital economy has a profound impact on the trajectory of the world and the public well-being of ordinary citizens. It affects everything from resource allocation to income distribution and growth. The United States still has a competitive advantage and accounts for the bulk of the information technology industry globally, with 35% in 2022 versus 31% for China.

Statista: Global information technology (IT) industry distribution from 2019 to 2022 by region

iShares US Consumer Staples ETF (IYK):

IYK is issued by iShares and provides exposure to US large-cap consumer staples stocks. The Funds’ investment objective is to seek total return, and the Fund’s investment strategy is to focus on distributions and current dividends paid to shareholders. The ETF offers light diversification with 55 companies spread across one geography and two main sectors. In fact, it is 100% US-based with 90.4% in consumer staples, 7.3% in healthcare and 2.3% in other. At the same time, the 15 large companies that make up this ETF have a strong balance sheet, with good growth prospects, and therefore represent 75.06% of it. Despite rising 6.43% over the past year, it has slightly declined 2.18% over the past six months, which is a good performance compared to other similar products.

What’s good about this ETF:

The consumer goods sector saw an increase in investments made in data analytics and technology. Stores work closely with commodity companies to ensure the supply of the right amount of inventory to increase product sales and product turnover. At the same time, many companies in this sector should grow in the coming year thanks to emerging markets such as China. The pandemic has also helped e-commerce.

iShares MSCI Emerging Markets ETF (EEM):

This ETF, powered by iShares, provides exposure to large- and mid-cap emerging market stocks that may be better positioned to benefit from economic developments in Asia. The ETF consists of 1,180 representative companies in five countries: China (29.9%), Taiwan (15.3%), India (13.5%), South Korea (12.2%) and others (29%) in five sectors: Information Technology (25.7%), Finance (22%), Consumer Choice (12.8%), Materials (9%) and Other (30.5%). It has some difficulty growing and fluctuates between rising and falling, according to its chart. However, it reached $58.80 in 2021 (its high point) and its current price is $39.49 and a recovery is possible in the coming weeks.

What’s good about this ETF:

Since the late 1980s, emerging market economies have been developing—structural changes are driving innovation and growth for local consumers. This compares to a time when emerging markets relied solely on the production and export of raw materials. For example, in 2008, commodities and materials stocks made up 50% of the MSCI Emerging Markets index. At the same time, emerging economies need to be sustainable, as their levels of public, household and corporate debt tend to be lower than those of advanced economies. Banks in emerging economies are well capitalized and well positioned to benefit from financial deepening as emerging households open bank accounts, accept credit cards and take out mortgages. China, Korea and Taiwan offer significant opportunities in e-commerce, online gaming and other emerging technologies.

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