You Can Get A Slice Of Apple For Just $30. But Should You?

By John-Erik Koslosky - September 4, 2012 | Tickers: AAPL, IYW, QQQ, XLK, VGT | 0 Comments

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One of the complaints about Apple (NASDAQ: AAPL) I hear from investor friends is that the stock is just “too expensive.”
They’re not talking about the price-to-earnings multiple, which is anything but expensive at about 15.8.
They’re referring to the share price, which is an imposing $670.
Many lay investors put money into the market in dribs and drabs. A few hundred bucks here. A few hundred there. The idea of investing $670 in one share of one stock seems risky.
Forget for a moment whether investing in one $670 share is any bigger a risk that dropping the same amount on 20 shares of a $33 stock.
What we’re dealing with is a psychological barrier keeping small-money investors from a great company.

It's unfortunate. But is there another way?

If you’re one of those investors, you can still get your hands on some Apple by buying shares of one of a handful of exchange-traded funds that hold a lot of the company.
Shares of these ETFs can be had for as little as $30, giving the drib-drab investor an easy way to pick up a slice of Apple.

But hold on before you do, because owning one of these ETFs is not quite the same as owning Apple.

Let’s take a closer look at four of these ETFs and what they have to offer.

*As of the the latest available disclosures.

The Upside

Investing in these Apple-rich ETFs has its advantages.
The most obvious is that you can get some exposure to Apple with pretty much whatever amount of money you’re interested in investing. There are investors, especially those just starting out, who do it $200-$300 at a time. Using ETFs like these allows you to forge ahead with that strategy while gaining some Apple exposure in the process.
The exchange-traded funds also offer the benefit of diversification. Buy into these and you’re not just getting Apple. You’re getting somewhere between a 5% and 10% weighting of tech heavyweights Google , IBM , and Microsoft , along with smaller amounts of dozens of other companies. That lessens the risk of a potential blunder at Apple taking a huge bite out of your portfolio.
Some of the tech ETFs also offer exposure to a broader range of stocks. The Technology SPDR includes telecom companies like ATT and Verizon among its largest holdings. The Powershares QQQs, meanwhile, holds shares in consumer discretionary, healthcare and consumer staples stocks.

The Downside

But it’s far from all roses when it comes to owning these Apple-heavy ETFs.
What one investor might see here as diversification, others will spot as dilution.
Sure, these ETFs might give you exposure to Apple, but it’s not the same as owning Apple.
How much of a difference is there?
Let’s take a look at how the ETFs performed against Apple over the past five years.

AAPL data by YCharts

That’s right. The best-performing of these four funds can boast a return that’s just a little better than one-tenth of Apple’s return since 2007.
The reason these funds own so much Apple in the first place is Apple’s own success and ballooning valuation. The more valuable it got, the bigger piece it became in each ETF’s assortment of holdings.

In fact, each of these ETFs owes a big part of its positive returns to Apple.

The Bottom Line

These ETFs can be enticing to investors looking to add some Apple to their portfolios without shelling out $670 a share. Buying into one will give them some exposure.

But if adding a shot of Apple's juice is what these investors are looking for, they should expect a watery mix from these funds.

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