Interested in investing in technology ETFs? Here the Investing News Network takes a look at the top five for investor consideration.
The global tech market may experience a slide in growth to 2 percent in 2020 as the COVID-19 pandemic continues to impact markets worldwide, reports Forrester.
Of the global tech market segments, software spending is expected to see the biggest drop, while tech outsourcing and telecom services will fare better during the coronavirus outbreak.
On a positive note, with more and more offices and schools moving to remote work and online learning, demand is increasing for cloud computing infrastructure services, specialized software, communications equipment and, as mentioned, telecom services.
Once the previously trillion-dollar global tech sector rebounds, exchange-traded funds (ETFs) will continue to be a popular alternative investment strategy that investors can use to gain exposure to tech stocks. ETF shares offer market participants new avenues for stock and bond investing, while providing lower expenses and easier access to the financial services industry.
From value to growth investment styles, many different investment objectives can be targeted across the plethora of technology ETFs available on the market. These investment vehicles also provide the option to enter mutual funds or individual technology stocks, or to participate in initial public offerings.
Within the tech ETF space, there are 76 technology funds with a cumulative US$140.05 billion in assets under management, as per data from ETFdb.com. On average, the expense ratio of tech ETFs is 0.6 percent. Here, the Investing News Network looks at the top technology ETFs by assets under management; all numbers and figures were current as of July 13, 2020.
1. Vanguard Information Technology ETF (ARCA:VGT)
Assets under management: US$33.88 billion
Founded on January 26, 2004, the Vanguard Information Technology ETF has a diverse portfolio, with a focus on small- and micro-cap stocks as well as large-cap companies.
This tech ETF has 338 holdings, with Apple (NASDAQ:AAPL) weighing in on top at 18.2 percent. Microsoft (NASDAQ:MSFT) takes up 17.32 percent of the fund, followed by Visa (NYSE:V) with a 4.07 percent weighting and Mastercard (NYSE:MA) at 3.52 percent.
2. Technology Select Sector SPDR Fund (ARCA:XLK)
Assets under management: US$32.72 billion
The Technology Select Sector SPDR Fund has 73 technology companies in its holdings and began trading on December 16, 1998. This ETF typically avoids smaller- and mid-cap companies and instead focuses on the big names in the technology sector.
Its top holdings are: Microsoft at 22.24 percent, Apple weighted at 21.45 percent, Visa at 4.46 percent, Mastercard at 3.59 percent and Cisco (NASDAQ:CSCO) at 2.72 percent.
3. First Trust Dow Jones Internet Index Fund (ARCA:FDN)
Assets under management: US$9.83 billion
The First Trust Dow Jones Internet Index Fund was started on June 23, 2006, and currently has 42 holdings with exposure to internet-focused companies. This fund targets tech companies, but also gives some weighting to consumer discretionary firms.
In terms of market cap breakdown, large-cap companies comprise 66 percent of this fund, while the rest of its holdings are in the mid-cap and small-cap categories.
The top holdings of this fund are: Amazon (NASDAQ:AMZN) at 10.55 percent, Facebook (NASDAQ:FB) with 6.81 percent, Netflix (NASDAQ:NFLX) at 5.66 percent, PayPal (NASDAQ:PYPL) at 4.96 percent and Salesforce.com (NASDAQ:CRM) at 4.57 percent.
4. iShares US Technology ETF (ARCA:IYW)
Assets under management: US$5.8 billion
The iShares US Technology ETF was begun on May 19, 2000, and currently has 163 holdings with a focus on US tech companies.
The top holdings of this fund are very much in line with its peers. Microsoft weighs in at 19.41 percent, followed by Apple at 18.63 percent. The two Alphabet stocks, (NASDAQ:GOOG) and (NASDAQ:GOOGL), account for just over 7.8 percent in the ETF’s total weighting, capped off by Facebook at 4.4 percent.
5. iShares Expanded Tech-Software Sector ETF (CBOE:IGV)
Assets under management: US$5.1 billion
Rounding out this list of technology ETFs list is the iShares Expanded Tech-Software Sector ETF. With 104 holdings, it offers exposure specifically to software companies within North America.
The top holdings of this iShares ETF are Adobe (NASDAQ:ADBE) with a 8.79 percent weighting, Microsoft at 8.51 percent, Salesforce.com at 8.62 percent, Oracle (NYSE:ORCL) at 7.66 percent and Intuit (NASDAQ:INTU), weighted at 5.14 percent.
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Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.