“There are times when investors may wish to avoid technology companies,” Ryan Issakainen, an ETF strategist at First Trust, said of the First Trust Nasdaq-100 Ex-Technology Sector Index (NYSEArca: QQXT) – the tech sector makes up two-thirds of the Nasdaq-100.
“To do the ‘exes’ suggests you know that sector or country is burdened by something that will remain so indefinitely,” Mark Luschini, chief investment strategist at Janney Montgomery Scott LLC, cautioned.
Standout “ex” ETFs include the WisdomTree Dividend ex-Financials Fund (NYSEArca: DTN), which has attracted $1.3 billion in assets, and the iShares MSCI Pacific ex-Japan Fund (NYSEArca: EPP), which holds $3.4 billion in assets. While the financial sector and Japanese economy have been relatively poor performers, potential investors should note that holding onto these types of funds may force them to miss out on any potential upside in the future. [ETF Spotlight: WisdomTree Dividend Fund]
“If you’re wrong, and what you’re excluding works out, you’re at a significant disadvantage,” Todd Rosenbluth, an ETF analyst at S&P Capital IQ, said.
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.