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Using An Old ETF For A New Investment Theme

by
July 24, 2018 3:17 pm
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As an investment theme, blockchain is still in its nascent stages, but that's not stopping issuers of exchange traded funds from testing the blockchain waters.

There are six dedicated blockchain ETFs on the market, all of which debuted this year. Some of these funds are gaining traction with investors while others are waiting for acclaim and assets.

What To Know

Blockchain's prominence in the investment lexicon is increasing largely on the back of investors' awareness of cryptocurrency. However, the digital currency universe represents just one avenue of deploying blockchain technologies. That's actually a plus for investors as blockchain's myriad potential applications cement the theme's long-term potential from an investment perspective.

While blockchain is a new investment concept, some old ETFs can help investors tap this theme, including the Invesco PowerShares QQQ Trust, Series 1 (NASDAQ:QQQ). QQQ tracks the tech-heavy Nasdaq-100 Index, which includes an array of companies with blockchain exposure.

Why It's Important

QQQ allocates over 61 percent of its weight to technology stocks, the bulk of which are large-cap companies. That positions QQQ as a potentially more diverse play on blockchain technologies via technology titans such as Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT), Intel Corp. (NASDAQ:INTC) and more.

“When thinking about the application of this technology more broadly, industries that place an importance on transacting with efficiency and certainty could benefit,” said Inveso in a recent research piece. “Given the vast number of financial transactions conducted every day (more than 1.5 billion2) across the world economy, it becomes clear how impactful blockchain could be.”

One example of potentially fertile territory of blockchain and involved companies is cybersecurity. That's relevant to QQQ because several of the fund's holdings are direct and indirect cybersecurity plays.

“Blockchain’s distributed network and transparency reduces the threat of fraud, hacking and data manipulation. With no information being siloed, the likelihood of errors or intentional changes is minimized,” said Invesco.

What's Next

QQQ's blockchain viability also includes exposure to some common, everyday applications.

“These include anytime assets are transferred in some form (physical, monetary or digital), the managing of cross-organizational workflows and anywhere there is a need for verification or audit. As such, blockchain has the potential to impact retail, industrial supply chains, insurance, capital markets, health care and the government,” according to Invesco.

Related Links:

Spicing Up The Infrastructure Trade

A New Spin on ESG ETFs


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