Amid the coronavirus-led shutdown, the internet has become an increasingly important part of people’s lives and the economy. As a result, it just makes sense that stock market investors want to invest in internet-related stocks.
If you could buy only one ETF on a market pullback, maybe it’s not the S&P 500 ETF SPY, -2.07%, even though it tracks the benchmark index S&P 500 SPX, -2.07%. The ETF to consider is First Trust Dow Jones Internet Index Fund FDN, -2.38%.
Let’s explore this issue with the help of a chart.
Note the following:
• The chart shows that when the stock market dropped, the internet ETF outperformed the Dow by about 16%.
• The chart shows that during the recent rally, the internet ETF has outperformed the Dow by about 27%.
• In the market rally, the Nasdaq 100 ETF has been the star performer. However, the internet ETF has outperformed the Nasdaq 100 ETF by about 5.5%.
• The chart shows that the internet ETF fell in the Arora buy zone during the market drop, giving investors an excellent opportunity. Those investors are now sitting on about a 32% profit.
How to buy
For those who are itching to buy, start with a small stake — scale in. As a note of caution, the emphasis is on “scale in.”
Answers to your questions
Answers to some of your questions are in my previous writings. Please click here for details.
Disclosure: Subscribers to The Arora Report may have positions in the securities mentioned in this article or may take positions at any time. Nigam Arora is the founder of The Arora Report, which publishes four newsletters. Nigam can be reached at [email protected].