Tech ETFs: Exposure to the Big Guys With Less Risk

If I had a nickel for every time that someone asked me about Apple (AAPL) in the past 2 weeks, I would have... well, I'd have 40 cents. (Eight people asked if I thought they should buy some shares.)

My answer rarely changes. There's never a bad time to purchase any investment... there's only a bad time NOT to sell.

My philosophy and approach is well-documented on my site. Simply stated, 3 of the 4 potential outcomes of any investment (i.e., big gain, small gain, small loss, big loss) are terrific outcomes. The only way that you can become a poor investor is to allow any investment to become a big loss.

YES... small losses are great for your investment portfolio! They give you a chance to rebalance. They may be advantageous to your taxes. But most importantly, they prevent the possibility that you will have a rotten egg in your financial basket.

Would I buy AAPL at $185? No. But that doesn't mean it is a bad investment.

I happened to take a bit of AAPL in 2006 around $55 per share. It had fallen from $90 in January 2006 to the low 50s by the early summer. I nipped. AAPL rose to the mid 90s with little resistance, before the option-backdating scandal sent the stock back into the mid 80s. With a 10% trailing stop-loss in place, I sold at $88 for a 60% profit!

Greedier folks will point out that Apple has pretty much risen... unabated... from $88 to $188. In fact, I might have had a 240% gain had I chosen to "stick with it."

Once again, however, I use a simple approach to stock market success; I control only what an investor can control. And you can control the final outcome of every single decision that you make! You can secure a big gain, small gain or small loss, while always avoiding the possibility of ever suffering a huge drop!

On the investment process... I am "sans emotion." I don't have any. While I am as greedy and as fearful as every other human being you may encounter, those primary emotions do not exist inside the box. Big gain, small gain, small loss on everything that I may choose... because that is what I can control.

What about Google (GOOG)? I'd make another 40 cents on the 8 people who ask me if it's time to acquire shares in the 10th largest company in the world. If you've been reading my web log, you'd know that I am more inclined to get exposure to GOOG through the First Trust Dow Jones Internet Index (FDN). (What's more, I would control the outcome by securing a big gain, small gain or small loss.)

Granted, to the untrained eye, GOOG looks far superior to FDN. In particular, GOOG has outgained the diversified index 60% to 38%.

That said, Google is more volatile than the index which contains it. (Note: The Dow Jones Internet Index has a 10% Google weighting.) until recently, Google spent plenty of time above FDN. And quite frankly, I prefer a bit more diversification in the ever-changing sector.

Perhaps my favorite way to capture positive trends in tech is with the Vanguard Info Tech Index (VGT). You get your Apple, Cisco (CSCO), Google and Microsoft (MSFT) without over-thinking your route to financial success.

What's more, there's nothing wrong with the old-standby, the Nasdaq 100 (QQQQ), for broad-based tech/biotech exposure. Just have a plan to sell... and you'll be successful for life.

Full Disclosure: Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above.