What is NBDS? (Pros, Cons, and Strategies)

In today’s fast-evolving investment landscape, it's essential to stay ahead of market trends and identify potential disruptors. The Neuberger Berman Disrupters ETF, commonly referred to as NBDS, is designed for investors who want to seize opportunities in disruptive innovation. This blog post will delve into what NBDS is, and discuss its advantages, disadvantages, and potential investment strategies.

What is NBDS?

NBDS is an Exchange Traded Fund (ETF) that focuses on companies identified as disruptors across various industries. The fund aims to capitalize on the growth potential of businesses that are innovating and redefining traditional sectors of the economy.

Key Features of NBDS

• Disruptive Innovation Focus: Invests in companies pioneering advancements in technology, healthcare, and other sectors leading innovation.
• Global Reach: Though U.S. companies figure prominently, NBDS holds positions in firms from diverse geographic regions.
• Criteria for Inclusion: Companies selected typically have demonstrated significant impact and potential for growth through disruptive products, services, or business models.

The ETF aims to provide exposure to companies that are changing the landscape of their industries, creating new markets, or shaping the future of technology and business.

NBDS Composition

NBDS encompasses a diversified range of high-growth companies across multiple sectors. You might find well-known disruptors such as Tesla (TSLA), Square (SQ), and Teladoc (TDOC) in its portfolio. The fund seeks to balance these growth-oriented companies with emerging firms poised to make significant impacts in their respective fields.

Pros of NBDS

Exposure to High-Growth Sectors

One of the most compelling advantages of NBDS is its exposure to high-growth sectors. Innovation and disruption are the key drivers behind many of the top-performing stocks, and NBDS offers a portfolio that capitalizes on this trend. As these companies grow and disrupt their industries, investors stand to benefit from significant capital appreciation.

Diversification Across Industries

NBDS provides a diversified exposure to multiple industries, reducing the risks associated with investing in a single sector. Whether it’s technology, healthcare, or renewable energy, NBDS includes a mix of companies leading innovation across various fields.

Potential for High Returns

The companies in NBDS are often characterized by rapid growth and innovation, which can lead to substantial returns. Investors looking to capitalize on the next big thing in technology or industry shifts may find NBDS an attractive investment option.

Cons of NBDS

High Volatility

Investing in disruptive companies often comes with heightened volatility. The high-growth nature of these businesses can lead to significant price swings, which might not be suitable for conservative investors or those with a low risk tolerance.

Lack of Dividends

Many disruptive companies reinvest their earnings into their operations and growth rather than paying out dividends. As a result, NBDS might not be ideal for income-focused investors seeking regular dividend payouts.

Market Timing Risks

Disruptive companies can experience periods of intense popularity followed by sharp declines. The timing of market entry can significantly impact investment results, making it essential for investors to consider their investment horizon and risk tolerance.

NBDS Investment Strategies

While NBDS offers an exciting opportunity to invest in transformative companies, it’s crucial to adopt appropriate strategies to maximize returns and manage risks.

Long-term Investment Strategy

Given the high volatility and potential for significant growth, a long-term investment strategy is often most appropriate for NBDS. Holding NBDS over an extended period allows investors to ride out the short-term fluctuations and benefit from the long-term growth of disruptive industries.

Dollar-Cost Averaging

By consistently investing a fixed amount in NBDS over time, investors can mitigate the impact of market volatility. This strategy, known as dollar-cost averaging, reduces the risk of making large investments at market peaks and takes advantage of market dips to purchase shares at lower prices.

Sector Rotation

Investors can also implement a sector rotation strategy, periodically rebalancing their NBDS holdings to focus on sectors showing the highest potential for disruption and growth. By staying informed about industry trends and company performance, investors can optimize their portfolios for maximum returns.

Complementary Investments

While NBDS offers high growth potential, balancing it with more stable, income-generating investments like dividend ETFs can provide a more well-rounded portfolio. This approach helps manage risks associated with the high volatility of disruptive stocks.

Conclusion

NBDS is an enticing option for investors looking to participate in the growth of disruptive industries and companies. While it offers significant potential for high returns, it's crucial to be aware of the associated risks, including high volatility and the lack of dividends. By adopting a long-term investment perspective and employing strategies like dollar-cost averaging and sector rotation, investors can better position themselves to benefit from the transformative trends shaping the future.