Over the last year, the technology sector has outperformed the wider market. The technology sector consists of enterprises that are engaged in the research, development, and marketing of a diverse variety of hardware and software products utilized by consumers and corporations. It is feasible to become a multimillionaire through stock market trading, but an investor must make the correct purchases. Not all stocks are created equal, and some provide superior value. Exchange-traded funds (ETFs) are an excellent method to diversify an investor's assets since they allow an investor to invest in dozens or hundreds of equities simultaneously. However, ETFs come in a variety of flavors, including broad-market funds and specialty funds.
Broad-market funds, such as S&P 500 ETFs, invest in a diverse range of industries. They are often less risky, but also yield lesser returns on average. Niche exchange-traded funds (ETFs) invest exclusively in inequities from a single industry. They have the potential to produce larger returns than average but also entail higher risk. Investing in technology-focused exchange-traded funds (ETFs) can help an investor generate better returns while reducing an investor's risk. ETFs usually carry less risk than individual equities, although the technology industry is well-known for its fast growth. If an investor is interested in investing in technology companies, there are several ETFs that may help an investor earn a lot of money.
It comprises both established titans like Apple Inc. (AAPL), Microsoft Corp. (MSFT), and Amazon.com Inc. (AMZN), as well as a slew of rapidly expanding newer firms. The sector has been a significant driver of the stock market's overall growth.
What are Exchange Traded Funds (ETF)?
ETFs have gained in popularity partly as a hedge against the risk associated with investing in technology-related growing companies, whose stock prices typically decline when new technology reaches the market. Rather than investing directly in individual firms, wise investors select funds that invest in a diverse range of companies within a sector, shielding them from the risks associated with specific shares. ETFs allow investors to profit from developing trends across a broad variety of sectors in various ways.Conclusion
Another reason contributing to the ETFs' phenomenal performance is the broader boom in the technology sector, which has resulted in share prices increasing across the board in subsectors such as software, manufacturing, hardware, and the Internet of Things. Other market segments have been influenced by technology stocks as well, as seen by the banking industry's rapidly changing market dynamics as crypto and fintech take the world by storm. These changes have caused havoc on whole financial portfolios over the previous six months.
The hedge fund industry as a whole is feeling the pinch as a result of the evolving financial landscape. Its image has been tarnished over the last decade, as its hedged returns have been unable to keep up with the unhedged returns of market indices.
Different Technology ETF that an investor Should Try
2. ETFMG Video Game Technology Wedbush
BLOK is an actively managed exchange-traded fund that invests at least 80% of its assets in firms that are actively developing and utilizing blockchain technology. Blockchain technology is a form of distributed ledger technology that serves as the foundation for a large number of cryptocurrencies. The fund's great majority of holdings are situated in the United States, and more than half are in the software and services sector of the economy. It employs a diversified approach, investing in a combination of growth and value equities across a range of market capitalizations.
PayPal Holdings Inc. (PYPL), a supplier of online payment solutions; Voyager Digital Ltd. (VYGR: CNQ), a provider of cryptocurrency brokerage services; and Square Inc. (SQ), a financial services and digital payments business, are the fund's top three holdings.
ETFMG GAMR is an exchange-traded fund that follows the EEFund Video Game Technology Index, which analyzes the performance of companies involved in the electronic gaming industry. The ETF invests in the video gaming sector as a whole and in a broad portfolio of companies, including game developers, console and chip manufacturers, and game merchants. 5 It invests in companies with a range of market capitalizations, including value and growth. Wemade Co. Ltd. (112040:KRX), a Korean mobile and online game developer; Roblox Corp. and NetDragon Websoft Holdings Ltd. (777:HKG), a Chinese video game developer, are the fund's top three holdings.3. ARK ETF for Next-Generation Internet
ARKW is an exchange-traded fund that invests primarily in domestic and foreign exchange-traded securities of companies engaged in cloud computing, cyber security, e-commerce, big data and artificial intelligence (AI), mobile technologies, the Internet of Things (IoT), social platforms, blockchain, and peer-to-peer lending (P2P). The fund typically invests in large-cap firms with the potential for considerable growth. The corporation's top three assets are Tesla Inc. (TSLA), an electric vehicle and renewable energy firm; Shopify Inc. (SHOP), a global e-commerce company located in Canada; and Twitter Inc. (TWTR), a microblogging and social media platform.4. Vanguard Information Technology Exchange-Traded Fund
The Vanguard Information Technology ETF (NYSEMKT: VGT) invests in 341 stocks from the United States' technology sector, with Apple, Microsoft, and NVIDIA among its major holdings. Due to the fund's inception in 2004, it has a very long track record. Since its inception, it has averaged a rate of return of about 13% each year. If an investor wants to amass at least $2 million, an investor will need to invest little more than $550 each month for 30 years at a rate of return of 13%.5. Invesco Equal-Weight S&P 500 Technology ETF
Naturally, thirty years is a long time to wait. However, because ETFs are low-maintenance investments, an investor may simply invest consistently and leave an investor's money alone for as long as feasible. With enough patience and little to no work, an investor can save a considerable sum of money.
The Invesco S&P 500 Equal Weight Technology ETF (NYSEMKT: RYT) invests in 76 stocks belonging to the S&P 500's information technology sector. While this fund has fewer assets and offers less diversity, the S&P 500 index includes some of the strongest firms in the United States, which can help mitigate risk.6. SPDR S&P Software & Services Exchange-Traded Fund
Since the fund's launch in 2006, it has averaged an annual rate of return of around 14%. To accumulate at least $2 million in total savings, an investor would need to save around $450 per month for 30 years at a rate of return of 14%.
The SPDR S&P Software & Services ETF (NYSEMKT: XSW) invests in 186 stocks and tracks the S&P Total Market Index's software and services sector, which includes subsectors such as application software, data processing, and information technology consulting. This ETF is more recent than the other two on the list, having been founded in 2011. However, it has generated larger returns, averaging approximately 22% each year since its start. At such a pace, it would take around $100 each month for 30 years to amass $2 million.7. TECH
Bear in mind, however, that because this fund is new, there are no assurances that an investor will experience returns this high over the long haul. All specialized exchange-traded funds (ETFs) are riskier than broad-market funds, and an investor's investments may suffer greater volatility.
The ETFs Morningstar Worldwide Technology ETF (ASX Code: TECH) provides investors with exposure to global technology firms operating in the hardware, software, and information technology services sectors. TECH seeks to offer investors a return that is comparable to the Morningstar Developed Markets Technology Moat Focus Index before fees and costs. TECH tracks the index using a complete replication approach, which means that it holds all of the index's constituents in near proportion to their index weights.8. Invesco NASDAQ Internet ETF
The index includes between 25 and 50 worldwide technology businesses operating in sectors such as software, semiconductors, data processing, computer hardware, and databases. Companies are vetted using Morningstar's unique moat approach to ensure that only those with significant competitive advantages relative to their peers are included. Additionally, firms are included in the index based on their attractiveness compared to their fair value, as determined by Morningstar's team of stock analysts.
The Invesco NASDAQ Internet ETF (NASDAQ: PNQI) is a non-diversified exchange-traded fund that seeks to replicate the performance of the NASDAQ CTA Internet Index, which is composed of companies engaged in internet-related businesses that trade on the New York Stock Exchange, the Cboe Exchange, or the NASDAQ Stock Market. The ETF invests about 90% of its assets in the underlying index's equities. According to Reddit, PNQI is the tenth best technology ETF to purchase. The Invesco NASDAQ Internet ETF (NASDAQ: PNQI) now manages more than $1 billion in net assets. It has a year-to-date daily total return of 3.85% and a 0.60% net expense ratio. The ETF's 52-week price range is between $163 and $264.9. First Trust NASDAQ-100-Technology Sector Index Fund
One of the fund's largest assets is Facebook, Inc. (NASDAQ: FB), a California-based technology company that controls a variety of social media platforms. At the end of the first quarter of 2021, 257 hedge funds in Insider Monkey's database owned holdings in Facebook, Inc. (NASDAQ: FB) totaling $40 billion, up from 242 in the prior quarter totaling $38 billion.
Distillate Capital, an asset management business, highlighted a few stocks in its Q1 2021 investor letter, one of which was Facebook, Inc. (NASDAQ: FB). The fund said the following:
Facebook has previously entered and exited the portfolio, and did so this quarter as a result of a significant improvement in expected free cash flows, to the point where its value fulfills the criterion for inclusion.
The First Trust NASDAQ-100-Technology Sector Index Fund (NASDAQ: QTEC) is an exchange-traded fund that seeks to replicate the investment results of the NASDAQ-100 Technology Sector Index, which is a market capitalization-weighted index of companies classified as technology by the Industry Classification Benchmark. The fund invests about 90% of its assets in technology firms. According to Reddit, QTEC is the ninth greatest technology ETF to purchase.10. iShares Technology Sector ETF
The First Trust NASDAQ-100 Technology Sector Index Fund (NASDAQ: QTEC) now manages more than $3.4 billion in net assets and has a year-to-date daily total return of 6.38%. The fund's price has fluctuated between $101 and $157 during the last 52 weeks. Adobe Inc. (NASDAQ: ADBE), a California-based computer software firm, is one of the fund's top holdings. At the end of the first quarter of 2021, 107 hedge funds in Insider Monkey's database owned positions in Adobe Inc. (NASDAQ: ADBE) worth $12.1 billion, down from 114 in the prior quarter worth $11.9 billion.
Polen Capital, an asset management business, highlighted many stocks in its Q1 2021 investor letter, including Adobe Inc. (NASDAQ: ADBE). Adobe and Autodesk are both great instances of the quarter's rotation. Both companies are market leaders in their respective sectors, which are facing structural headwinds. Regardless of each business's strength, cyclical and firms with greater debt and poorer profitability were preferred this quarter. By contrast, Adobe and Autodesk both have low leverage, strong profitability, large recurring revenue streams that reduce cyclicality, and capital-light business models—all of which we value as investors. Adobe and Autodesk were also two of the Portfolio's top three performances in 2020.”
The iShares Expanded Technology Sector ETF (NYSE: IGM) invests in businesses headquartered in North America that operate in the technology, communications, and consumer discretionary sectors. It is a non-diversified fund that invests 90% of its assets in the underlying index's stocks. IGM is ranked eighth on Reddit's list of the best technology ETFs to purchase. The iShares Expanded Technology Sector ETF (NYSE: IGM) now manages more than $3.3 billion in net assets. The fund's year-to-date daily total return is 8.21%. The fund's net expense ratio is 0.46%, and its 52-week price range is $261 to $392. The firm has invested more than 8.5% of its total assets in Microsoft Corporation (NASDAQ: MSFT), a technology corporation located in Washington, D.C.11. iShares Expanded Technology-Software Sector ETF
At the end of the first quarter of 2021, 251 hedge funds in Insider Monkey's database-owned holdings in Microsoft Corporation (NASDAQ: MSFT) were valued at $58.9 billion, down from 258 in the prior quarter valued at $52.8 billion. In recent remarks, they have written extensively on Microsoft. It was their greatest contributor last year and one of the Portfolio's highest weightings. Its company continues to grow as a result of numerous dominating, critical, and competitively advantaged companies, such as Office 365 and Azure.
The marketplaces in which it competes are huge, which enables the firm to compound at scale. The firm earned nearly $40 billion in sales in the most recent quarter alone, indicating a 17% growth rate. Microsoft's business model's inherent operating leverage has resulted in a 34% earnings increase in the most recent quarter. Despite the wide rotation in the first quarter and Microsoft's strong performance in 2020, they believe the company's business fundamentals remain strong, and the price continues to reflect those fundamentals.
The iShares Expanded Technology-Software Sector ETF (BATS: IGV) seeks to replicate the investment performance of the S&P North American Expanded Technology Software Index, which is composed of stocks of US-based companies engaged in the software, interactive home, and interactive media industries. It is a non-diversified fund that invests 90% of its assets in the underlying index's equities. According to Reddit, IGV is the seventh greatest technology ETF to purchase.12. SPDR Select Sector Technology Fund
The iShares Expanded Technology-Software Sector ETF (BATS: IGV) now manages about $5.2 billion in net assets and has a year-to-date daily total return of 0.62%. With a 52-week price range of $260-$389, the net expense ratio is 0.46%. Zoom Video Communications, Inc. (NASDAQ: ZM), a communications technology firm located in California, is one of the fund's top holdings. At the end of the first quarter of 2021, 54 hedge funds in Insider Monkey's database owned holdings in Zoom Video Communications, Inc. (NASDAQ: ZM) totaling $5.6 billion, down from 59 in the previous quarter totaling $6 billion.
Zoom Video Communications, Inc. is a cloud-based software business that specializes in video-first communication platforms. Zoom shares fell in the fourth quarter as investors took profits following the stock's great run on the back of rapid pandemic-driven Zoom adoption, revenue growth, and free cash flow generation. They maintain their conviction because Zoom continues to be a market disruptor in the $100 billion unified communications market with its scalable, globally distributed, cloud-based, video-first offering, while its well-known brand (Zoom has become a verb!) should enable it to grow profitably as it gains market share.
The SPDR Technology Select Sector Fund (NYSE: XLK) is an exchange-traded fund that seeks to replicate the performance of the Technology Select Sector Index. It is a non-diversified fund that invests in at least 95% of the index's underlying companies using a replication method. According to Reddit, XLK is the sixth-best technology ETF to purchase. The Technology Select Sector SPDR Fund (NYSE: XLK) now manages more than $40 billion in net assets and has generated a total daily return of 6.17% year to date. The fund's net expense ratio is 0.12% and its 52-week price range is $97-$143. Mastercard Incorporated (NYSE: MA), a New York-based payments firm, accounts for more than 3.5% of the fund's assets under management.13. Vanguard Information Technology ETF
Among the hedge funds tracked by Insider Monkey, Virginia-based Akre Capital Management is a significant stakeholder in Mastercard Incorporated (NYSE: MA), owning 5.8 million shares valued at more than $2 billion. While customers resumed a significant portion of their spending by summer, their Visa and Mastercard use patterns shifted. For obvious reasons, individuals moved to contactless payments—one of the Covid-era innovations we believe will be permanent—and substituted online shopping and food delivery for travel purchases. Consumers spend more on debit cards and less on credit cards; Visa and Mastercard earn more on credit card transactions.
Additionally, they profit more on cross-border transactions, which are mostly derived from international travel, which halted during the epidemic's early stages. Visa and Mastercard's profits per share fell by 7% and 16%, respectively, in comparison to their usual mid-teens growth rates. We are unconcerned, believing that they will rapidly catch up in a post-vaccine world. The stock of Visa returned 17.1%, while the stock of Mastercard returned 20.2%.
The Vanguard Information Technology ETF (VGT, $316.61) has long been regarded as one of the top technology ETFs for wide exposure and one of the most affordable ways to invest in the sector. However, by 2020, it will have surpassed the previous record. VGT overtook the Technology Select Sector SPDR Fund (XLK) in terms of assets under management in mid-May and hasn't looked back since, enjoying about $37 billion in assets under management to XLK's $34 billion. The Vanguard Information Technology ETF invests in about 330 technology-related equities, with a significant concentration on large-cap firms, which account for approximately 85% of the fund. However, it's critical to remember that "technology" is not necessarily what an investor believes it is.14. ARKK Invest Innovation ETF
For example, the technology sector consists of software businesses such as Microsoft (MSFT), hardware manufacturers such as Apple (AAPL), and chip manufacturers such as Intel (INTC). However, it is not Facebook (FB) or Alphabet (GOOGL), the parent company of search leader Google. That's because the Global Industry Classification Standard (GICS), which defines which stocks belong in which sectors and industries, was updated in 2018. This included the establishment of the communications sector, which effectively "stole" key equities from the technology industry, including Facebook and Google.
Nonetheless, VGT provides access to a variety of sectors, including systems software, application software, data processing, semiconductors, technology hardware, communications equipment, and information technology consultancy. Simply keep in mind that this broad net is not as diverse as it appears. VGT is market capitalization-weighted, which implies that the larger the stock in the fund's investment universe is, the more assets the fund allocates to it. Thus, while VGT owns 330 equities, over 40% of AUM is invested in Apple and Microsoft — by a country mile the sector's two largest firms.
This means that a change in the fortunes of either tech company might have a major impact on the fund as a whole. What about the other side? Apple and Microsoft are two of the world's most financially stable corporations, which means they have plenty of maneuverability if things become really ugly. Additionally, VGT is one of the least-cost technology ETFs on the market, with annual fees of only 10 basis points. (One-tenth of a percentage point is referred to as a basis point.)
The ARK Innovation ETF is one of several funds managed by Catherine Wood, the company's founder, CEO, and chief investment officer. Prior to launching ARK Investment Management LLC in 2014, she worked at AllianceBernstein for 12 years as the Chief Investment Officer of Global Thematic Strategies. Since launching ARK Invest, Wood has won several distinctions and medals. But most importantly for investors, she has built a number of extremely successful products, including ARKK, which has outperformed 99% of its peers in the mid-cap growth category over the last one, three, and five years and has outperformed the majority of technology-focused exchange-traded funds.15. iShares PHLX Semiconductor ETF
The ARK Innovation ETF seeks to invest in innovative technologies in four distinct sectors: genomics, industrial automation, next-generation internet, and fintech (financial technology). The fund generally maintains between 35 and 55 positions, and Wood is willing to invest heavily in high-conviction positions. She has invested more than 10% of ARKK's assets in Tesla (TSLA), a stock to which she has notoriously issued lofty price goals.
For example, in February, when Tesla was selling at approximately $900 per share, she predicted the company would reach $7,000 per share by 2024; after adjusting for the effect of Tesla's 5-for-1 stock split, shares are currently trading at about $2,126. Invitae, a genetic testing expert, estimates that she possesses an additional 9%. (NVTA). ARKK is not for the faint of heart, but Wood has demonstrated an ability to handle her investors' money.
Semiconductor chips are utilized in almost every aspect of modern life, from AC/DC power supply and dishwashers to satellite transponders and ultrasound scanners. Additionally, they serve as the foundation for the developing "Internet of Things" - the digital connectivity of everyday objects such as refrigerators and alarm clocks. The iShares PHLX Semiconductor ETF (SOXX, $315.68) is the largest semiconductor exchange-traded fund, investing in 30 major semiconductor firms.16. Global X Telemedicine & Digital Health ETF
Naturally, this includes Intel, a market leader in a number of chip types. However, it includes Nvidia, the fast-growing graphics expert best known for its gaming processors but also for its large data center business and involvement in emerging technologies such as artificial intelligence and autonomous driving. Additionally, SOXX owns Texas Instruments (TXN), a company whose analog chips are much simpler yet have a plethora of applications in consumer items and industrial systems.
At the present, the top holding is an 8.2% stake in Broadcom (AVGO), whose products will aid phone makers in their transition to 5G technology. Due to the adjusted weighting technique used by SOXX, the assets invested in individual stocks are not precisely proportionate to their market capitalization. However, bigger firms continue to have a disproportionate amount of influence on the fund, with AVGO, TXN, INTC, NVDA, and Qualcomm (QCOM) all holding around 8% weightings at the moment.
The Global X Telemedicine & Digital Health ETF (EDOC, $17.27) is another “thematic” product from Global X. Rather than broad-sector or even industry-specific funds, these ETFs are meant to track specific economic, technical, and other developments. If an investor has just logged onto video to "see" an investor's doctor, an investor is not alone. Prior to the pandemic, a lot of different polls indicated that the adoption rate of individuals utilizing telehealth in the United States was between 10% and 20%. In April, at the height of the pandemic – by which we mean the stress and uncertainty placed on the systems – we observed that adoption stood at 46%, according to a McKinley poll, and as high as 60% in other surveys.17. Synnex Corporation
EDOC, which launched in late July 2020 and has collected over $360 million in assets, provides investors with exposure to the future of health through a portfolio of 40 holdings. The company's holdings include iRhythm Technologies (IRTC), a provider of ambulatory cardiac monitoring, Veeva Systems (VEEV), and Livongo Health (LVGO), a provider of software that assists people in managing chronic conditions by measuring blood pressure, blood sugar levels, and other health indicators.
As is the case with many of the top technology exchange-traded funds, this one has some foreign exposure. While the United States accounts for the lion's share of assets at 83%, an investor also has access to Japanese medical services business M3 and China's Alibaba Health.
Synnex is a provider of information technology solutions and value-added services in the technology sector, including distribution, logistics, and integration. Among the company's primary competencies are information technology systems and servers, system components, software, communication and security equipment, and consumer electronics. Synnex offers over 40,000 technology goods from manufacturers worldwide and provides technology solutions to over 25,000 distributors and retail clients.18. Arrow Electronics Inc.
On July 6, the Republican National Committee (RNC) disclosed that hackers had gained access to one of its vendors' computer systems, Synnex. The RNC stated that no data had been accessed. According to reports, the cyber attackers are linked to Russia's foreign intelligence organization.
Arrow Electronics, Incorporated Arrow Electronics is a market leader in the distribution of electrical components, computer products, and creative computing solutions to original equipment manufacturers (OEMs), contract manufacturers, and other commercial customers worldwide. The company distributes batteries, screens, sensors, memory devices, and a range of other electrical components. Furthermore, it offers ancillary services, solutions, and software. Globally, the business employs around 20,000 employees and services more than 180,000 clients in the IT industry and other sectors.19. Intel Corporation
Intel designs and manufactures computer components and peripherals, including processors, chipsets, server systems, memory and storage, ethernet equipment, and wireless connectivity solutions. 15 Its solutions are targeted at a range of current and emerging computing technologies, including edge computing, 5G networks, cloud computing, artificial intelligence, and self-driving cars. Intel now employs around 110,600 employees globally. According to a July 15 news report, the company has been exploring a bid of up to $30 billion for semiconductor producer GlobalFoundries Inc.
The acquisition, which would be the largest in Intel's history, is not certain. If completed, it will aid the corporation in its pursuit of more chips for other industries. Intel has already committed more than $20 billion this year to expand its chip production capacity in response to a global semiconductor shortfall.
ETFs have grown in popularity partially as a hedge against the risk inherent in investing in technology-related growth firms, which frequently see their value drop when new technology enters the market. Rather than investing directly in individual companies, prudent investors choose funds that invest in a wide variety of companies within the sector, protecting them from possible dangers connected with particular equities. In some ways, ETFs enable investors to profit from emerging trends across a broad range of industries.