This Volatile State Street ETF Requires Patience From Investors
The State Street SPDR S&P Kensho New Economies Composite ETF has lagged the S&P 500, but this tech-focused fund is built for long-term disruptive growth.
It was the best of times, it was the worst of times, but in the end it was just meh. That pretty much sums up the past 12 months for the State Street SPDR S&P Kensho New Economies Composite ETF (KOMP), one of the Kiplinger ETF 20 — our favorite exchange-traded funds.
It has been a roller-coaster ride. The ETF rallied on three separate occasions over the past 12 months. But all three ascents fizzled out, each one falling roughly 15% after hitting its peak. All told, the growth-oriented ETF has returned 8.5% over the past 12 months, lagging the 15.7% return in the S&P 500 Index.
We pegged this ETF as an aggressive, shoot-the-moon play because it invests in companies that are disrupting traditional industries. Think artificial intelligence, robots and automation. The stocks it holds span a variety of sectors, including electronic equipment and components, healthcare, industrials, semiconductors and software.
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It can take years for disruptive technologies to pay off in a big way, so we're not fazed; we're going to be patient.
However, all that innovation comes with volatility. Over the past three years, SPDR S&P Kensho New Economies has been about twice as volatile as an ETF that tracks the S&P 500.
Why KOMP lagged
Tech stocks make up 39% of assets in SPDR S&P Kensho New Economies. That's in line with the S&P 500. And many of them have performed well, including chipmaker Himax Technologies (HIMX); its stock has climbed 62% over the past 12 months.
Shares in Ouster (OUST), which makes sensors that make three-dimensional maps possible, have climbed 49%. Both stocks are top 10 holdings in the ETF.
But SPDR S&P Kensho New Economies does not own shares in some of the biggest gainers in the S&P 500. That includes shares in S&P 500 index constituents such as chipmaker Advanced Micro Devices (AMD), which soared 278% over the past 12 months, and Teradyne (TER), a maker of semiconductor-testing equipment and industrial robots, which climbed 192%.
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
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