Navigating ETF Investing in a Shifting Software Landscape
Understanding the Challenge
When it comes to ETF investing, you need a solid approach to protect your capital. Experienced traders know that navigating the impact of AI on software stocks is crucial. David Sambur warns that AI disruption will continue to challenge software stocks, causing significant declines. The IGV Software ETF is down 20% this year due to these issues, with institutional investors facing large uncertainties about AI's impact on traditional software models.
For instance, Apollo's Sambur notes that software's AI troubles will persist, citing 'very large unknowns'. This uncertainty can be daunting, but you can take steps to mitigate its effects on your investments. By understanding the challenges posed by AI disruption, you can make informed decisions about your ETF holdings.
The Setup
The software industry's struggle to predict how dynamics will evolve over the next one to five years is a major concern. This uncertainty is reflected in the performance of the IGV Software ETF, which is still down 20% this year. Meanwhile, other ETFs like the SPY and QQQ have been more resilient, with the SPY's 50-day moving average at $585 providing key support. You can use this information to adjust your investment strategy and allocate your resources more effectively.
For example, you could consider allocating 10% of your portfolio to the QQQ, which has a lower volatility compared to the IGV Software ETF. Alternatively, you could invest in individual stocks like AAPL, which has a strong track record of innovation and adaptability. By diversifying your holdings, you can reduce your exposure to any one particular sector or stock.
The Play
So, what can you do to navigate this shifting landscape? One strategy is to use a combination of ETFs and individual stocks to diversify your portfolio. You could allocate 20% of your portfolio to the SPY, 30% to the QQQ, and 50% to individual stocks like AAPL and MSFT. This approach can help you spread your risk and potentially increase your returns. Additionally, you can use options trading to hedge your bets and protect your investments from potential declines.
A 2% position size can limit your max loss to $500 on a $25,000 account, providing a safety net for your investments. You can also set an alert at $570 for the SPY, allowing you to quickly respond to any changes in the market. By being proactive and adaptable, you can stay ahead of the curve and make the most of your ETF investments.
Your Action Step
Now that you understand the challenges and opportunities in ETF investing, it's time to take action. You can start by reviewing your current portfolio and assessing your exposure to software stocks. Consider allocating 5% of your portfolio to the IGV Software ETF, but be prepared to adjust your strategy as the market evolves. You can also set a stop-loss at 10% below your entry point to limit your potential losses.
For instance, if you invest $1,000 in the IGV Software ETF at $100, you can set a stop-loss at $90. This will automatically sell your shares if the price falls below $90, limiting your loss to $100. By taking concrete steps to protect your investments, you can navigate the challenges of ETF investing and achieve your long-term financial goals.
Last updated: March 2026
By the Investing Strategies Editorial Team
This content is for informational purposes only. Not financial advice—always do your own analysis before making investment decisions.