As we move from 2021 into 2022, I’m thinking about the relentless shift towards e-commerce and how it will impact my portfolio. Internet shopping has already had a big boost from Covid and the rise of the Omicron variant is only likely to exacerbate it. Indeed, according to an S&P report, US online sales are set to pass $1trn in 2022. In light of this, I’m again looking at an interesting ETF.
ETFs (exchange-traded funds) are funds that track an index or sector and can be bought and sold like a share through most online brokers. They allow me to invest in multiple companies in a single fund and are usually low cost.
The ETF
The ETF I’m looking at is L&G Ecommerce Logistics UCITS ETF (LSE:ECOG). This London-listed ETF offers an alternative way of investing in e-commerce without investing in online retailers themselves. This ETF focuses on logistics service companies and technology firms that enable e-commerce by tracking the performance of the Solactive E-commerce Logistics Index.
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All of the firms in that index either offer warehousing or delivery of online goods or provide software to these logistic companies. The fund is well-diversified across countries. At the moment, there are 43 publicly traded companies in the index from all over the world. The firms are mainly from the US, but there are also entities from Japan, Germany, and the UK. The index doesn’t allow any company in it more than a 15% weighting. Indeed, at the moment, none of the companies represent more than 4% of the index.
The fund is relatively new and has only been going since 2018, but the return has been impressive. Over 12 months and year-to-date it has returned over 20%. Over the three years since the fund was started, it’s increased by 70%.
The ETF has a reasonable ongoing charge of 0.49%. One negative is that the fund does not pay dividends, but I look to this as a growth investment rather than an income stream.
Should I invest?
Despite the notable return of this fund, there have been individual e-commerce companies that have vastly outperformed this. For example, Amazon, over three years has increased by around 120%. Etsy, a global marketplace, has increased over 300% during the same period. Perhaps if I can pick the winning internet retailers, I can beat this ETF.
That said, I’m not confident in picking which online retailers will win in the long run. However, by investing in this fund, I’m not choosing retailers themselves.
As the famous fund manager Peter Lynch said, “During the Gold Rush, most would-be miners lost money, but people who sold them picks, shovels, tents, and blue-jeans (Levi Strauss) made a nice profit”.
This is how I think about the companies in this fund. Regardless of which internet retailers succeed, they will probably all need the delivery solutions and software of the companies in this fund.
I could be wrong, but for this reason, I’m seriously considering adding it to my own portfolio as we head into 2022.
