Saving the Vacuum Cleaner: A Lesson in Disaster Preparation
Years ago, I was told a story by a woman who had been a child in England during World War II. She and her sister had gotten so used to the bombings that the spectacle seemed more exciting than frightening, and the two girls would climb to their attic and peer out of tiny windows as the bombs dropped in the distance. One day, as the planes flew over her neighborhood, for the first time she was afraid. In that wave of fear, she did the only thing that seemed to make sense; she grabbed a vacuum cleaner and frantically dragged it away from the window, high onto a dusty table—for safety. And she cried.
That story has stayed with me because it seems like the little girl’s reaction was improbable, illogical, incomprehensible, and even a little funny. Why the vacuum cleaner? Why was that the one thing that seemed like it needed saving as the bombs fell? I expect it’s a typical reaction… to grab what we can, no matter what it is. The inner child takes over because we haven’t planned ahead.
For months we’ve watched from afar as natural disasters wreaked devastation across the country. This month, it was our turn. More than 9,217 acres were burned, 25 structures were destroyed, and 55 more were damaged in the Canyon 2 fires in Anaheim Hills that was finally fully contained on Tuesday. And while “our” fire was mild in comparison to the wine country wildfires that burned at the same time, it certainly made the reality of such a disaster much more concrete. It brought home the need for each of us to take the necessary steps to prepare for a swift and well-planned evacuation in the event of any emergency.
As the fire worsened last week and our skies turned orange, I found myself in conversations I never thought I’d have. Friends and clients watched in fear as the fire swept closer to their homes. Most who faced evacuation were scrambling to figure out their next steps. “I have no idea what to take!,” Sara told me as she sat in my office last Thursday. “My son put together an earthquake kit last year, so I felt prepared for that kind of thing. But leaving everything behind feels even worse somehow.” Sara wasn’t alone. So many people I spoke to felt unprepared and vulnerable at the thought of having to evacuate their homes.
And then I talked to my friend Linda. Unlike most of us (myself included), Linda seems prepared for anything. She told me that when she’d worked at the fire department, they gave every employee a laminated list of what to grab in an emergency. As she named all of the items on her “grab and go” list, I saw how different this was from a typical earthquake kit (at least any list I’ve ever seen). Here are just a few things that stood out to me:
- A waterproof bag with one full change of clothes, including underwear and outerwear, and comfortable walking shoes
- Electronics (mobile phones, laptops, iPads) and chargers—including a portable back-up charger
- Plastic sheeting, duct tape, and dust masks in case you need to seal your home or shelter from airborne contaminants such as smoke
- Medications for you and your pets
- A ziplock bag with copies of essential papers such as your driver’s license, proof of insurance, passports, social security cards, and printed list of personal contacts
- Cash, ideally at least $500 in small bills in case a disruption in banking services renders your ATM and credit cards useless
I began to think about what my laminated list should include. Sara and so many others seemed overwhelmed with choices. I could suddenly see how, in the midst of the chaos, a little girl might choose to save a vacuum cleaner. I decided it was time to stop thinking about planning for an emergency and start doing.
I started with Linda’s list, which also included the usual supplies. Enough water and non-perishable food to care for every family member, including pets, for at least one week. A well-stocked first-aid kit. Flashlights and batteries. Even a whistle to call for help. (For a complete list of what to include in emergency kits for your home and car, see the Build a Kit guide at ready.gov.)
But what about the emotional things? Would I remember to grab my grandmother’s pearl necklace in a panic? What about baby pictures of my children that I haven’t stored anywhere else? If, like Sara, I faced the possibility of losing everything I left behind, what would I want to take with me? After some careful thought, I have the answers. They are written down in the Notes app on my iPhone, ready to “grab and go.”
I hope you too will take our local fires as an urgent call to action. Build your emergency kit. Be sure you’ve uploaded your important papers to a secure online vault like eMoney (which we offer at no cost to every client) or our online Sharefile tool. Include your birth and marriage certificates, wills, insurance policies, military documents, retirement account statements, loan statements, and deeds. Create your laminated or electronic list of what to grab if you have to leave your home urgently.
Hopefully, none of us will be forced to evacuate our homes or cope with a disaster, but by putting your plan in place ahead of time, you’ll have what you need if and when you need it. Plus, you’ll be much more prepared to preserve those items that matter most in your heart—whether or not your list includes a vacuum cleaner.
An Emerging Theme In Thematic Investing
Exchange traded funds (ETFs) are popular vehicles for market participants looking to engage in thematic investing. Thematic investing looks to take advantage of future growth trends, including disruptive technologies. Given that forward-looking approach, stock-picking in the thematic universe is equally as hard, if not harder, than in traditional market segments.
Go back to the late 1990s, before the bursting of the Internet/technology bubble. Back then, investors stood an equal chance of selecting E-Toys over Amazon or some no longer in existence networking equipment maker over Cisco.
“History is littered with examples of prospering industries with no indication of which company will come to dominate the industry,” according to Nasdaq. “This suggests that successful thematic investing is more about selecting baskets of investments rather than single securities.”1
The ALPS Disruptive Technologies ETF (DTEC) provides basket exposure to a broad swath of thematic investments. DTEC features exposure to not just one or two emerging technologies, but 10 such themes on an equal-weight basis.
The 10 themes represented in DTEC are as follows: 3D printing, clean energy, cloud computing, cybersecurity, data and analytics, fintech, healthcare innovation, Internet of Things (IoT), mobile payments and robotics and artificial intelligence (AI).
Generally speaking, fund issuers have been quick to respond to disruptive and transformative technologies, bringing products to market to tap these themes. Prior to DTEC coming to market late last year, there were ETFs devoted exclusively to cloud computing, cybersecurity, robotics and other themes featured in DTEC. However, few use the basket approach to themes employed by DTEC.
February, a rough month for U.S. stocks, highlighted the advantages of DTEC's multi-theme methodology. Seven of the 10 themes found in the fund finished the month lower, but DTEC was able to outperform the S&P 500 on a monthly basis.
Focusing on individual themes can be rewarding over the long-term, but not all investors have the risk tolerance for such a strategy. Consider this: the Indxx Global Robotics & Artificial Intelligence Thematic Index jumped more than 48% in 2017. That type of performance is enough to seduce many investors, but that same benchmark slipped 7.60% in February, generating monthly volatility of 34.10%.2 Said another way, that robotics and AI index's February slide was more than triple the loss experienced by DTEC during the month.
While it probably is not accurate to call the indexes devoted to individual disruptive themes “old,” many use old school weighting methodologies. For example, the two largest components in the ISE Cloud Computing Index are Netflix, Inc. (NFLX) and Amazon.com Inc. (AMZN). Only two members of the S&P 500 have larger market values than Amazon while Netflix currently has a larger market cap than Wal-Mart (WMT) and McDonald's (MCD).
Holdings subject ot change as of 12/31/17
For its part, DTEC not only equally weights its 10 disruptive themes, but its 100 components as well, potentially reducing single stock risk in the process. As the chart below confirms, equally weighting stocks is rewarding across sectors and market capitalization segments.
Past performance does not guarantee future results
Annualized returns for the past 10 years show seven of the 11 S&P 500 sectors, when equally weighted, outperform cap-weighted equivalents, according to S&P. Three of those seven sectors – financial services, healthcare and technology – are prominent parts of DTEC's roster.
1 Source: Nasdaq Dec. 28, 2015 https://www.nasdaq.com/article/what-thematic-investing-is-and-its-strengths-and-risks-cm559209
2 Source: ETF Replay data
An investor should consider the investment objectives, risks, charges and expenses carefully before investing. To obtain a prospectus which contain this and other information call 866.675.2639 or visit www.alpsfunds.com. Read the prospectus carefully before investing.
An investment in the ALPS Disruptive Technologies ETF (DTEC) may be subject to substantially greater risk and volatility than investments in larger and more mature technology companies.
There is no assurance that the market developments and sector growth based upon the themes discussed in the article will come to pass.
ALPS Disruptive Technologies ETF shares are not individually redeemable. Investors buy and sell shares of the ALPS Disruptive Technologies ETF on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
ALPS Advisors, Inc. (AAI) has engaged IRIS Werks, LLC (IRIS) to produce analysis and commentary on ALPS-advised ETFs. IRIS currently has a compensated business relationship with AAI. AAI is not affiliated with IRIS.
The content and opinions expressed in this article are that of the author and not the views and opinions of AAI. In addition, AAI assumes no responsibility to ensure the accuracy of the content written by the author.
There are risks involved with investing in ETFs including the loss of money. Additional information regarding the risks of this investment is available in the prospectus. Past Performance is not indicative of future results.
The fund is new and has limited operating history.
ALPS Portfolio Solutions Distributor, Inc. is the distributor for the ALPS Disruptive Technologies ETF. AAI is affiliated with ALPS Portfolio Solutions Distributor, Inc.
The author is not an investment professional and this article should not be considered investment advice. While the information and statistical data contained herein are based on sources believed to be reliable, the author takes no responsibility to ensure the accuracy of the content. Additionally, this article should not be relied on or be the basis for an investment decision. Information that is historical is not indicative of future results, and subject to change.
S&P 500®: A capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
S&P SmallCap 600®: A capitalization-weighted index that measures the small-cap segment of the U.S. equity market.
S&P MidCap 400®: A capitalization-weighted index that measures the mid-cap segment of the U.S. equity market.
Indxx Global Robotics & Artifical Intelligence Thematic Index: The Indxx Global Robotics & Artificial Intelligence Thematic Index is designed to track the performance of companies listed in developed markets that are expected to benefit from the increased adoption and utilization of robotics and Artificial Intelligence ("AI"), including companies involved in Industrial Robotics and Automation, Non-Industrial Robots, Artificial Intelligence and Unmanned Vehicles.
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