Why Facebook In The 'Q’s' Doesn’t Matter

December 13, 2012


They are the Global X Social Media Index Fund (NYSEARca: SOCL), the First Trust US IPO Index Fund (NYSEArca: FPX), the First Trust Dow Jones Internet Index Fund (NYSEArca: FDN) and the PowerShares Morningstar StockInvestor Core Portfolio (NYSEArca: PYH).

SOCL was the first ETF to add Facebook to its portfolio—on May 28—and holds the biggest position in the company, at 14.5 percent.

Two exchange-traded notes, the Etracs Next Generation Internet ETN (NYSEArca: EIPO) and the Etracs Monthly 2X Leveraged Next Generation Internet ETN (NYSEArca: EIPL) added Facebook exposure very quickly as well, and the social media company now has a weighting of about 10.5 percent.

But even SOCL hasn’t shown huge reactions to moves in Facebook.

That’s the beauty of indexing—you diversify away most single-security risk to instead isolate the market risk of the market you’re targeting.

What I’m getting at is that if you’re deciding whether to buy QQQ, looking at its new Facebook position is the wrong place to start.

Instead, I’d recommend looking at its portfolio in depth and figuring out whether the allocations as a whole make sense to you. For example, do you really want the 67 percent allocation to technology that the “Q’s” serve up?

That’s a blog for another day, and until then, it’s important to thoroughly think through why you might want to own Facebook and, from there, how.



At the time this article was written, the author held no positions in the securities mentioned. Contact Carolyn Hill at [email protected].


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