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By Robert Goldsborough | 08-21-2015 11:00 AM

Online Giants in a Single Fund

Investors who are bullish on Internet companies--including Amazon, Google, and Facebook--but want to avoid single-stock risk can consider First Trust Dow Jones Internet Index.

Bob Goldsborough: For exposure to U.S. Internet companies, one exchange-traded fund that investors can consider is First Trust Dow Jones Internet Index (FDN).

It's far and away the largest Internet ETF. It holds firms that generate at least half of their annual revenue from the Internet. The kinds of companies found in this fund are Internet-commerce firms, such as Amazon (AMZN) and eBay (EBAY), and Internet-services companies, such as Google (GOOGL) and Facebook (FB).

This ETF brings together all such firms into a single fund. One thing that these firms all have in common is that competition is very intense. However, the return drivers for Internet companies can vary. The success of some firms here is driven by advertising growth, while others will succeed through increased user adoption or margin improvement. Broadly, though, most of these firms are benefiting from increased online ad spending, increased time spent online, and aggregation of consumer data.

Internet companies can be volatile. So, for investors who are bullish on Internet companies but want to avoid single-stock risk, FDN is a reasonably priced choice.

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