This ETF offers exposure to companies engaged in some way in social media, including companies that provide social networking, file sharing, and other web-based media applications. As such, SOCL delivers targeted access to a relatively new—and potentially volatile—corner of the global technology industry. Given the concentration in a few names and potentially big swings in prices, SOCL probably shouldn’t receive a huge allocation in any long-term buy-and-hold portfolio. But this EF can certainly be useful as a “satellite” position for investors who believe that social media companies will be successful in the future, and can be a way of establishing positions to companies not included in more popular, broad-based equity ETFs.
It should be noted that SOCL maintains a global focus, meaning that social media companies in both developed and emerging markets outside the U.S. are included in the underlying portfolio. It should also be noted that SOCL may include companies that maintain significant operations outside of the social media arena (GOOG is a good example of that situation). The inclusion of these companies may diminish the correlation between SOCL’s price and the success of social media companies. Finally, it is important to know that many social media companies are non-public, meaning that this ETF won’t necessarily include all components of this industry.
SOCL is very targeted in nature, but can be useful for achieving certain objectives. Those seeking more broad-based technology exposure have a number of options in the Technologies Equities ETFdb Category, including XLK.