Dear readers, it was reported that the SGX is licensing iEdge-FactSet Global Internet Index to Nikko Asset Management which will adopt the index for ETF listing. According to reports, the iEdge-FactSet Global Internet Index will track “companies in Internet and data services, general Internet and online services, Internet support services, financial software and services, virtual reality and engineering software business segments and online retail.”
The biggest constituent stocks in the index includes Facebook, Amazon, Alphabet, Tencent and Alibaba. The index also comes at a time when there is interest in thematic investing.
What do I think of the proposed IEDGE-FACTSET GLOBAL INTERNET INDEX? Well, I would think that the index appeals to investors who are interested in internet-related companies and at the same time would want to reduce risk. However, I would think that the days of rapid growth for most of these internet-based companies is really over. If you recall, a $1,000 investment in Amazon in 1997 would turn you into a millionaire now.
While most of the big name internet players are navigating towards the next unchartered frontier of internet growth that could still provide opportunities, how many of the big companies decade ago are the biggest companies today?
Therein lies the conundrum: if it was just the early days of popular tech names like Facebook, Amazon, such an internet-related index would not be appealing to investors as most of these internet giants were unknown then.
My suggestion would be for investors interested in index funds to choose a more defensive theme.