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Analyzing The Motley Fool's ETF TMFC
The Motley Fool is a massive financial company. They have an extremely popular stock advisor, they do a lot of work in media, and even own a hedge fund. They also own a collection of ETFs, and in this article, I want to talk about one of their biggest ETFs, Motley Fool 100 Index ETF (TMFC).
The first thing one should look at when researching an ETF is the expense ratio. TMFC has an expense ratio of .50% which I would say is pretty high especially when compared to ETFs from Vanguard, Schwab, and SoFi but also less expensive than Ark Innovations ETF. Obviously, I don't expect The Motley Fool to have an expense ratio as low as Vanguard but having half a percent of the funds value being used for operating expenses does sound expensive.
The goal of the ETF is to invest into the largest, most liquid companies that The Motley Fool's analysts and newsletters have recommended. This has led to the fund's largest holdings being an 11.3% allocation to Apple, a 9.86% allocation to Microsoft, an 8.34% allocation to Amazon, an 8.14% allocation to Google, and a 4.45% allocation to Facebook. These are just 5 of their holdings out of 100, but they make up over 42% of the fund. That's a huge amount of the fund that is just in 5 companies. While I think that all 5 of these companies are likely to be great stocks to own over a long period of time, one must share that sentiment to even consider investing into this ETF.
TMFC has beaten the S&P 500 over the last 3 years as tech has dominated which makes up a very large percentage of TMFC. For investors that want access to large cap growth stocks, TMFC is a great way to do it, and while the ETF does have a relatively high expense ratio, it has gotten absolutely incredible returns since inception which would cause me not to worry too much about the expense ratio.
My only hesitance in buying the ETF myself would be that a lot of the stocks in the ETF are already in my portfolio with the amount of capitol allocation I already want, but for investors who want to invest in the types of companies that this ETF represents, it's definitely an investment that they should consider.
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