Many investors and advisors have likely already thought long and hard about their big tech allocations. Earlier this year, they may have asked themselves whether they had too small of an allocation. Now, however, the tide has turned significantly, and many are concerned about being overweight big tech. Just ten or so firms have contributed to more than 80% of the S&P 500’s growth this year.
Recent survey data from Bank of America underscores the concentration risk investors are facing. Per that survey, investors are the more overweight towards tech than any time since December 2021. The bank’s analysis shows that 20% of funds had more than 40% of total assets in just seven tech firms. As such, investors may want to diversify a portfolio that’s overweight big tech via an equal weight strategy. One option to consider may be SDOG, the ALPS Sector Dividend Dogs ETF.
See more: “Three Dividend Stocks to Watch in SDOG”
Why SDOG? It takes a different approach from a generic equal-weight ETF. The fund equal weights whole sectors rather than just its holdings. SDOG equal weights ten different sectors, which helps limit the traditional overweight to utilities and financials other dividend strategies face. SDOG invests according to the “Dogs of the Dow” approach that looks for the stocks with the highest dividend yields. It does also, of course, equal weight its individual stocks.
Taken together, that produces an ETF with no sector weighted higher than 11.5% per VettaFi. It still retains a solid exposure to electronic technology at 8.4% to benefit from the space, but limits it such that the concentration risk decreases. Charging 36 basis points (bps), SDOG tracks the S-Network Sector Dividend Dogs Index and has returned 11.9% over the last three years. It also offers a 4.1% annual dividend yield.
Investors have a lot to consider right now, and an overweight big tech portfolio stands out as a key issue. SDOG could be one option to mitigate that concern, benefitting from the S&P 500 universe from which it draws its stocks while mitigating the big tech risk.
vettafi.com is owned by VettaFi LLC (“VettaFi”). VettaFi is the index provider for SDOG, for which it receives an index licensing fee. However, SDOG is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of SDOG.