The last five years haven’t been great for the TSX Composite Index. It’s up a mere 21.9%.
A number of things have kept Canada’s benchmark index down. 2012 and 2013 were terrible years for most large gold miners, which are a large part of the index. Canada’s banks struggled amid calls proclaiming a housing bubble would all hit them hard. And the price of oil fell from more than $100 per barrel to less than $30, at least temporarily.
Financials, energy and basic materials are Canada’s three largest sectors. No wonder the TSX struggled.
Compare that to the iShares NASDAQ 100 Index Fund (TSX:XQQ), which is up 101.2% in the same time period. It’s not even close.
But can the NASDAQ continue its blistering outperformance over the next five years?
There’s certainly a lot to like about investing in the world’s largest tech giants. Companies like Apple, Alphabet, and Microsoft have billions they can throw towards research and development. If anyone is going to build game-changing new innovations like self-driving cars, I’d bet on one of them.
But that doesn’t necessarily mean these companies are good investments. Remember that the best investments are often made in sectors that nobody likes. The tech sector is booming right now. Energy and materials aren’t. Logic would dictate those should be the sectors an investor is looking at today.
Investors should also keep in mind that many other ETFs have a large exposure to technology, particularly anything tracking the S&P 500. One of the reasons why the TSX Composite has performed so poorly is because it has only a small technology weighting.
