Interested in investing in technology ETFs? Here the Investing News Network takes a look at the top five for investor consideration.
The US accounts for over 40 percent of overall tech spending worldwide and is anticipated to grow at a rate of 6.3 percent in 2019. In comparison, European tech spending is expected to only grow by 0.1 percent. Tech spending in China and Asian regions are projected to reach US$769 billion.
As the tech sector continues to grow, exchange-traded funds (ETFs) have become a popular alternative investment strategy for investors to gain exposure and invest in the tech industry. ETFs offer investors new avenues for equity and bond investing, while providing lower expenses and access to the financial services industry.
A number of different investment objectives can be targeted, from value to growth investment styles, across the plethora of sector funds and sector ETFs available in the market. These investment vehicles also provide additional options to mutual funds, individual technology stocks and participation in initial public offerings (IPOs).
According to Morningstar, passive funds received US$68.6 billion in new fund flows in June, with Blackrock’s (NYSE:BLK) iShares receiving top amounts. The behemoth US ETF company received US$34.6 billion in fund inflows in June alone.
Within the technology ETF space, there are 73 technology ETFs with a cumulative US$94.08 billion in assets under management (AUM) according to ETFdb.com. On average, the expense ratio of tech ETFs is 0.59 percent. Here, the Investing News Network (INN) looks at top technology ETFs by AUM from ETFdb.com, with all numbers and figures current as of July 24, 2019.
1. Technology Select Sector SPDR (NYSEARCA:XLK)
Net assets: US$21.54 billion; current price: US$82.51
The Technology Select Sector SPDR has the largest net asset value in the sector at US$21.54 billion. There are 67 holdings of technology companies in this ETF, which began trading on December 16, 1998, on the NYSE American stock exchange. This ETF typically avoids most of the smaller and mid-cap companies and instead focuses on the big names in ths sector.
The top holdings of XLK are: Microsoft (NASDAQ:MSFT) at 19.48 percent, Apple (NASDAQ:AAPL) weighted at 16.66 percent, Visa (NYSE:V) at 5.74 percent, Mastercard (NYSE:MA) at 4.58 percent and Cisco (NASDAQ:CSCO) at 4.51 percent.
2. Vanguard Information Technology (NYSEARCA:VGT)
Net assets: US$21.300 billion; current price: US$222.73
Founded in January 26, 2004, Vanguard has the most diverse portfolio, with a focus on small- and micro-caps as well as large-cap companies.
VGT has 336 holdings, but the top holdings are similar to XLK, just with different weightings. Microsoft weighs at 15.6 percent in this fund while Apple is second with a 14.9 percentage, followed by Visa with a 4.5 percent weighting and Mastercard at 3.9 percent.
3. First Trust Dow Jones Intent Index (NYSEARCA:FDN)
Net assets: US$8.90 billion; current price: US$149.60
FDN was started on June 23, 2006, and currently has 42 holdings with exposure to companies that are internet-focused. This fund targets tech companies but also gives some weighting to consumer discretionary firms.
In the market cap breakdown of companies, this fund has 66 percent large cap companies with the rest of its holdings in mid-cap and small-cap categories.
The top holdings of this fund are: Amazon (NASDAQ:AMZN) at 10.24 percent, Facebook (NASDAQ:FB) with 8.6 percent, PayPal (NASDAQ:PYPL) at 5.26 percent, Salesforce.com (NASDAQ:CRM) at 4.88 percent and Alphabet (NASDAQ:GOOG) standing at 4.77 percent.
4. iShares US Technology ETF (NYSEARCA:IYW)
Net assets: US$4.26 billion; current price: US$208.16
The fund was begun on May 19, 2000, and currently has 149 holdings with a focus on US tech companies.
The fund is similar to VGT and XLK in terms of exposure to large cap asset classes. In fact, the top holdings of this fund are very much in line with its peers, although with a different allocation of weightings.
Microsoft weighs in at 17.22 percent, followed by Apple at 14.73 percent. The two Alphabet stocks (NASDAQ:GOOG) (NASDAQ:GOOGL) account for just over 11 percent in the ETFs total weighting, capped off by Facebook at 4.84 percent.
5. iShares Expanded Tech-Software Sector ETF (CBOE:IGV)
Net assets: US$2.77 billion; current price: US$225.78
Rounding out our list of technology ETFs list is the iShares Expanded Tech-Software Sector ETF. With 94 holdings, IGV offers exposure specifically to software companies within North America. This fund started on July 10, 2001, and has an average annual return of 8.84 percent.
Top holdings of this fund are Adobe (NASDAQ:ADBE) with a 9.19 percent weighting, Oracle (NYSE:ORCL) at 8.8 percent, Microsoft at 8.68, Salesforce.com at 8.52 percent and Intuit (NASDAQ:INTU) weighted at 6.39 percent.
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Securities Disclosure: I, Dorothy Neufeld, hold no direct investment interest in any company mentioned in this article.