XLK - 5 Technology ETFs 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 pandemic.
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 telecom services.
Are you read to profit from the 2020 technology market?
Read your free outlook report on today.
Once the previously trillion dollar global tech sector rebounds, exchange-traded funds (ETFs) will continue to be a popular alternative investment strategy for an investor to gain exposure to tech stocks. ETF shares offer market participants new avenues for stock and bond investing, while providing lower expenses and access to the financial services industry.
According to Morningstar, passive funds received a record US$326 billion in new fund flows in March 2020, with More than $12 billion of that went to SPDR S&P 500 ETF.
From value to growth investment styles, a number of different investment objectives can be targeted across the plethora of technology 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).
Within the tech ETF space, there are 76 technology funds with a cumulative US$140.05 billion in assets under management (AUM), according to ETFdb.com. On average, the expense ratio of tech ETFs is 0.60 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 13, 2020.
1. Vanguard Information Technology (NYSEARCA:VGT)
Net assets: US$33.88 billion
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.
This tech ETF has 338 holdings, but the top holdings are similar to XLK, just with different weightings. Microsoft (NASDAQ:MSFT) weighs at 17.32 percent in this fund while Apple (NASDAQ:AAPL) weighs at 18.2 percentage, followed by Visa (NYSE:V) with a 4.07 percent weighting and Mastercard (NYSE:MA) at 3.52 percent.
2. Technology Select Sector SPDR (NYSEARCA:XLK)
Net assets: US$32.72 billion
The Technology Select Sector SPDR has 73 holdings of technology companies in this ETF, which began trading on the NYSE American stock exchange on December 16, 1998. This ETF typically avoids most of the smaller and mid-cap companies and instead focuses on the big names in the technology sector.
The top holdings of XLK 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.
Stay ahead of new opportunities in emerging new technology investing
Experts and analysts share their insight on the top trends to look out for in 2020 across emerging tech industries.
3. First Trust Dow Jones Intent Index (NYSEARCA:FDN)
Net assets: US$9.83 billion
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 10.55 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 (NYSEARCA:IYW)
Net assets: ????
This iShares ETF was begun on May 19, 2000, and currently has 163 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.
Microsoft weighs in at 19.41 percent, followed by Apple at 18.63 percent. The two Alphabet stocks (NASDAQ:GOOG) (NASDAQ:GOOGL) account for just over 7.8 percent in the ETFs total weighting, capped off by Facebook at 4.4 percent.
5. iShares Expanded Tech-Software Sector ETF (CBOE:IGV)
Net assets: US$5.1 billion
Rounding out our list of technology ETFs list is the iShares Expanded Tech-Software Sector ETF. With 104 holdings, IGV offers exposure specifically to software companies within North America.
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.
Don’t forget to follow us @INN_Technology for real-time news updates!
Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.