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Finally is there or is there not consensus on the future of growth ETFs like VUG and QQQ?
They have done so well over the last decade I'm reluctant to just say good bye.
These are really sector bets. Both VUG and especially QQQ are concentrated bets on the US technology sector. They are performing well because tech has done well recently.

There is not consensus on the future growth prospects of these. These are essentially concentrated sector bets. I don't think that's a good way to invest. Themes like this tend to change over time. A hot sector becomes cold, and sometimes that lasts for a very long time.

Most of us think it's better to invest in more broadly diversified funds. The S&P 500 for example contains many different sectors and isn't just a bet on technology. So once tech weakens and another sector strengthens, you aren't ruined. It has less dramatically strong performance, but it has steadier performance over the years.

To see why betting on specific sectors is a bad idea, here are a few different sectors and their worst, longest lasting negative periods

Canadian energy (XEG) - negative for 12 years
American energy (XLE) - negative after 13 years
Canadian tech (XIT) - negative for 14 years
US financials (XLF) - negative for 14 years
QQQ was negative for 16 years after the dot com bubble

I think you'll see why QQQ (tech sector) is questionable as a long term investment. All of the above once had very hot performance. Once it turned cold, they were disastrous.

Until very recently, Canadian banks were also extremely hot, with amazingly strong performance. There are several ETFs that are very heavy in Canadian banks: XFN, XDV and many others. I suspect that this is another example of a sector that is going to turn into a poor long term performer. This will be disastrous for all the people (and there are a lot of them!) who chased the performance of Canadian banks, making it a high weight in their portfolios.
 

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Canadian energy (XEG) - negative for 12 years
American energy (XLE) - negative after 13 years
Canadian tech (XIT) - negative for 14 years
US financials (XLF) - negative for 14 years
QQQ was negative for 16 years after the dot com bubble
That's a bit oversimplifying. One could think that XEG has "only" been negative for 12 years when compared to QQQ which has been negative for 16 years, but the real deal is that XEG has been mostly going down for the last 12 years and never started a recovery, while QQQ went down for 3 years, then recovered in 12 years, which means is has been going back up for 12 years.

Also, in XEG, money invested from 2006 to 2008 never broke even yet, except on a few little peaks in 2011 and 2014. For QQQ, money invested in the specific year 2000 took 15 years to break even, that's true, but money invested before or after that broke even in 8 years at most. For instance, money invested by the end of 1998 peaked then dropped then broke even to its initial value by the end of 2003, which is only 5 years later. Meanwhile, that money invested by the end of 1998 doubled in less than 2 years and maybe the investor luckily sold it because he was ready to retire or any other reason to lock-in those profits. And if not, well, as I said, it took only 5 years to recover from its 1998 value. (I know that QQQ didn't exist in 1998, but I'm taking an example based on the index)

The truth is that NASDAQ index never performed badly in the last 45 years, it just had a 2-year peak. That's sad for all the people who moved all of their money there in the 1-year window at the worse of the peak, but otherwise NASDAQ has always had an outperforming upward trend. That's very different from XEG which has been on a downward trend for 14 years.

We keep using the peak as a reference, but the peak has been reached after NASDAQ almost doubled its value in only 6 months. Would I invest on the top of a peak that just surged to an overvalued price after doubling in only 6 months? No, for the same reason I'm not investing in SHOP in 2020 post-crash surge. Prior to this (in 1999), the growth rate was about 30% CAGR and that money has been recovered after 5-8 years or less.

Though, I agree that since 2019, NASDAQ may have started another peak window. I'm watching closely AAPL that may drop in the next 1-3 years. Since 2015, AAPL's earning barely had a growth compared to its share price. And I'm very curious when will BRK start reducing its position on AAPL. I'm also curious about the split, because I expect more retail investors to buy at that accessible price which will drive AAPL up even more... right before a sell off. That's my two cents.
 

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What I think may have been forgotten in this conversation is this is a $125k LIRA that is the result of leaving a DB plan
I have recently switched jobs, and took out funds from my defined benefit pension which are now in a LIRA account. I took the decision after factoring multiple things: time horizon (22+ yrs), DB returns, retirement age of pension plan, low interest environment meant higher commuted value, etc.
ISTM this money should be invested like a pension plan, in a diversified portfolio across asset classes and geographic regions, available in 22 years upon retirement . Making sector bets seems to be the antithesis of how the funds should be deployed.... BWTFDIK. Maybe the OP is wanting to wing it after all.
 

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The truth is that NASDAQ index never performed badly in the last 45 years, it just had a 2-year peak. That's sad for all the people who moved all of their money there in the 1-year window at the worse of the peak, but otherwise NASDAQ has always had an outperforming upward trend. That's very different from XEG which has been on a downward trend for 14 years.
Never performed badly? I agree XEG is much worse, but QQQ has been no picnic. For the 10 years shown below (a full decade!) it first crashed about 85%, rallied a bit but nowhere back near old highs. Then it crashed 50% a second time, and overall, went nowhere after 10 years. This is the picture someone saw in 2010 and this is not an encouraging chart -- people were not feeling good about the NASDAQ in this time frame.

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Never performed badly? I agree XEG is much worse, but QQQ has been no picnic. For the 10 years shown below (a full decade!) it first crashed about 85%, rallied a bit but nowhere back near old highs. Then it crashed 50% a second time, and overall, went nowhere after 10 years. This is the picture someone saw in 2010 and this is not an encouraging chart -- people were not feeling good about the NASDAQ in this time frame.

View attachment 20455
You've missed this part :

We keep using the peak as a reference, but the peak has been reached after NASDAQ almost doubled its value in only 6 months. Would I invest on the top of a peak that just surged to an overvalued price after doubling in only 6 months? No, for the same reason I'm not investing in SHOP in 2020 post-crash surge. Prior to this (in 1999), the growth rate was about 30% CAGR and that money has been recovered after 5-8 years or less.
From October 1999 to March 2000, NASDAQ jumped by 100% in a matter of 6 months. Tell me, knowing the basics that one should buy low and sell high, would you invest after a +100% surge in 6 months? That's a perfect case of buy high, sell low.

Chop about only 1 year of that outlier, from October 1999 to November 2000 and you get a drawdown-to-recovery of 8 years with a max at -55%, which is comparable to what happened in 2008. For sure, if you use that specific peak, it'll seem two times worse.

Compare this to any other sector or index where you are allowed to chop only a 1-year outlier of over-excitement non-sense. No other performed better. I would never buy something that was historically growing at 30% CAGR and suddenly surged +100% in half a year, unless it has a very strong balance sheet demonstrating it's still undervalued. As I said, that's the same reason why I would never buy SHOP as of today.
 

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From October 1999 to March 2000, NASDAQ jumped by 100% in a matter of 6 months. Tell me, knowing the basics that one should buy low and sell high, would you invest after a +100% surge in 6 months? That's a perfect case of buy high, sell low.
I think you're applying hindsight knowledge, and I don't think it was as obvious then.

Would you have bought SPY after it jumped by 100% in just 2.5 years? Most people at the time said the exact same thing you're saying here -- it's a bubble, it can't sustain, it would be a mistake to buy the S&P 500 after it doubled in just a short period. See chart below.

I think you'll find that markets are not as easy to trade and navigate as you think. You're applying some big hindsight knowledge here. The S&P 500 looked just as much like a crazy bubble at the time (below).

So what do you think. Is the S&P 500 a massive bubble right now? It is 5.7x its price back at the last low. Some people do think this is an insane bubble that should not be bought into. Last time I checked, you were eagerly buying some of the highest risk stocks in the current market, and want to load into tech.

How do you know you're not doing the equivalent of buying the NASDAQ at its 2000 peak? Is that not a perfect case of "buy high, sell low" ?

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Would you have bought SPY after it jumped by 100% in just 2.5 years? Most people at the time said the exact same thing you're saying here -- it's a bubble, it can't sustain, it would be a mistake to buy the S&P 500 after it doubled in just a short period. See chart below.
A +100% jump in 2.5 years? That's +32% CAGR.
NASDAQ jumped +100% in 6 months. Thats +300% CAGR. Apples and oranges.

Am I using hindsight? Graph below is NASDAQ with a 5-year trend.
  • October 1999, do you buy it? Sure.
  • January 2000, do you buy it? Sounds risky. Let's see the valuation of NASDAQ main holdings...
  • March 2000, do you buy it? Total craziness.
1596747611842.png

Ok, I'll take a stock that has NOT crashed... yet. So I don't have any hindsight. We'll see where we'll be in 5 years from now. SHOP, with a 5-year trend at a crazy 70% CAGR. And let's see what information we have on hand at the moment. Do you buy it? SHOP is currently in the 1400s. I believe it will drop down in the 900s in a 1-3 years horizon, which would be a -35% crash from today. If I'm wrong on SHOP crashing in the next 1-3 years, then you'll prove your point. And if it doesn't crash, we'll see in 3 years how much higher is it from 1400s. Since it's on a +70% CAGR trend, a guess at least +30% CAGR would be a nice reward for taking such a risk. That means, SHOP has to be at 3000s in 3 years.

1596747787778.png

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To try to make sense of SHOP, this is what I would have to do. 18-month trend at... +220% CAGR. Can this be possible? Even though it's not the same sector, the closest case I've seen is KL which did +100% CAGR from 2017 to 2019, but its earnings also did +100% each year. AAPL's highest 3-year return was +115% CAGR. NFLX's highest 3-year return was +105% CAGR.

All that do say... how could NASDAQ make sense to buy after a +100% in 6 months?. That's what you can see on small caps and penny stocks, not an index holding all the biggest caps.

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