Top Tech ETFs Right Now
There’s just no stopping technology. Every industry heavily depends on it.However, in the investment world, some tech companies perform well whileothers don’t. If you are an investor who wants to invest in the tech sectorwith minimal risk, then technology exchange-traded funds (ETFs) might be asafe bet.Unlike direct investments in stocks, an ETF allows you to invest in the totaltechnology market by bundling the assets of several different companies into 1product. You can invest in the ever-changing tech industries without doinghomework on individual stocks.Check out Benzinga’s list of ETFs to make an informed decision about your nexttech investment.
Tech ETFs Biggest Gainers and Losers
Within the same sector, some ETFs perform worse than others due tooverexposure to a particular stock that has severely tanked and vice versa.The expense ratio for these funds ranges from 0.08% to 1.25%. They also happento be volatile due to the high risk/reward profile of the technology sector.Here are tech ETF investments — funds that were hit the most and least:
NEXTDC announced this morning a trading halt for its shares as the companylooks to raise $672 million. With strong growth recently, these funds are tobe used to continue growing the business. It appears management has timed thecapital raise well with its shares sitting at a high. Meanwhile, othercompanies such as Webjet Limited (ASX: WEB) are forced to raise capital atdeflated prices.I think NEXTDC will continue to see a growing demand for its services. Raisingcapital during a time of share price strength is a smart move to capitalise onits growth prospects. Once NEXTDC shares return to trading, I wouldn’t besurprised to see the share price drop closer to the issue price, providing abetter opportunity for investors.
How to use technology ETFs in a portfolio
Investors are typically attracted to technology stocks for their long-termgrowth potential.Some tech ETFs aim to track a market cap-weighted index, for example, theNasdaq-100 in the U.S., or the S&P/ASX All Technology Index in Australia.These ETFs offer broad tech-related exposure to technology stocks traded in aparticular market and can be used as a ‘core technology’ allocation.Other technology ETFs provide more focused exposure to a particular technologytheme, such as cybersecurity or cloud computing.Investors can use these more focused technology ETFs in their portfolio as acomplement to a broad-based technology exposure such as an internationaltechnology ETF that aims to track the Nasdaq-100, or as a tactical allocationto a technology theme they are interested in.
How to buy a tech ETF in Australia
Tech ETFs can be bought and sold just like you’d buy or sell any share on theASX.
Broad Australian Market Exposure
ASX Code | Description | Factsheet —|—|— ATEC | BetaShares S&P/ASX Australian Technology ETF – Invest in a diversifiedportfolio of Australia’s leading ASX-listed technology companies. | Download
Regional Market Exposure
ASX Code | Description | Factsheet —|—|— ASIA | BetaShares Asia Technology Tigers ETF – Gain exposure to the 50largest Asian technology companies (ex-Japan). | Download
Global Market Exposure
ASX Code | Description | Factsheet —|—|— NDQ | BetaShares NASDAQ 100 ETF – Gain exposure to many of the world’s mostinnovative companies that are revolutionising our everyday lives – includingApple, Amazon, Google and more. | Download HNDQ | BetaShares NASDAQ 100 ETF – Currency Hedged – Aims to track theperformance of the NASDAQ-100 Currency Hedged AUD Index | Download
ASX Code | Description | Factsheet —|—|— HACK | BetaShares Global Cybersecurity ETF – Gain exposure to the world’sleading cybersecurity companies – a sector with strong growth prospects. |Download RBTZ | BetaShares Global Robotics and Artificial Intelligence ETF – Invest inthe companies leading the Robotics and Artificial Intelligence (A.I.)megatrend – a sector likely to have a profound impact on the world oftomorrow. | Download CLDD | BetaShares Cloud Computing ETF – Exposure to some of the world’sleading companies in the cloud computing industry | Download Investing involves risk. The value of an investment and income distributionscan go down as well as up. Before making an investment decision you shouldconsider the relevant Product Disclosure Statement (available atwww.betashares.com.au) and your particular circumstances, including yourtolerance for risk, and obtain financial advice. An investment in anyBetaShares Fund should only be considered as a component of a broaderportfolio.* * *1. https://wearesocial.com/global-digital-report-20192. https://www.grandviewresearch.com/press-release/global-artificial-intelligence-ai-marketInvesting in world best tech companies through ETFs
Exchange Traded Funds are an efficient, lower-cost way to invest in tech
sector. As market analysts watching soaring tech share prices warn of an impendingtech bubble, is technology still worth investing in? And why should investorsconsider Exchange Traded Funds (ETFs) for their tech exposure?In basic terms, technology is scientific application for practical purposes orthe development of equipment and machines from scientific knowledge.We deal with technology so often that we barely notice how vast and all-encompassing it is. Every company in every sector uses or benefits from someform of technology.Investors in technology usually focus on single companies or, if looking atfunds, sector, or thematic exposure.The sector classification is often considered a “pure” exposure in thatcompanies deemed to be in the “information technology” sector generate thebulk of their revenue from hardware, software, and IT services.Microsoft would be classified within this sector due to generating most of itsrevenue through software and computer sales, whereas Facebook would notbecause it generates the bulk of its revenue through advertising.For example, an investment like ETFS Morningstar Global Technology ETF (ASX:TECH), which invests in global information technology companies, would beconsidered a sector exposure.Tech diversification vitalThematic exposure is more about investing in themes or trends. Many of thecompanies investors deem as “tech” might not fit the sector classification butmatch the theme instead.In this instance, Facebook is viewed as a thematic tech exposure because itgenerates its revenue from the trend towards online connectivity, whichextends to digital advertising.For example, investments like ETFS FANG+ ETF (ASX: FANG), which followsvirtual connectivity and consumer trends, or ETFS ROBO Global Robotics andAutomation ETF (ASX: ROBO), which follows the robotics and ArtificialIntelligence (AI) trend, would be considered thematic exposures.Where analysts talk about tech bubbles, they are often not talking about allforms of technology, but rather a specific industry or niche – think thedot.com bubble of the past – and the bubble is created from the companyfundamentals being below company pricing.Tech bubbles also occur at times of maximum innovation and change so therewill still be winners from these situations. Amazon survived the dot.com crashwhile others did not.From an investor perspective, this does not mean avoiding all tech investment,but rather being selective about how and where to invest. This is where ETFscan be valuable in allowing investors to spread the risk across a range ofcompanies where it may be harder to predict the winners or losers.Australian investors can be underexposed generally to technology companies –they only represent 4% of the ASX (i) compared to 21.27% of the MSCI WorldIndex (ii), with Australians typically heavily exposed to financials instead.That said, while small, the Australian technology industry is no slouch in theinnovation stakes, with companies like Afterpay (ASX: APT) and Atlassianinnovating and disrupting the market.Strong growth aheadTechnological advancement is the key driver behind some of the biggestmegatrends of our time, such as virtual connectivity and digitisation,automation, robotics, and biotechnology. We increasingly rely on technologyand with nearly 60 per cent of the world’s population estimated to be internetusers (iii), this is unlikely to change.In fact, the COVID-19 pandemic may have accelerated our dependence, with manyin lockdown depending on cloud storage and video conferencing for employmentand others heavily accessing online shopping and entertainment.In coming years, the roll-out of the 5G network is expected to furthertransform the world, for example, supporting the automation of global supplychains or home activities. It is predicted that around 500 billion deviceswill be connected to the internet by 2030 (iv).Technology is also the key to our ongoing battle to cure and prevent diseases.Biotechnology has come to the fore in the COVID-19 pandemic – it refers totechnologies that use biological processes, capturing companies that focus onresearch, development, manufacturing and/or marketing of products based onbiological and genetic information.Biotech is a growth industry predicted to be valued at more than US$729billion by 2025, compared to US$295 billion today (v). Biotech growth will bedriven by an increasing global population and the need for affordable,effective treatments and vaccines.Even our focus on moving to sustainable and renewable forms of energy, be itto power our homes, offices, or our transport, is supported by technology,from the creation of solar cells to power storage in the form of batteries.In the next five years, the market for battery technology is anticipated toreach $90 billion (vi) and the Tesla-built Hornsdale Power Reserve hassupported South Australia in achieving 50.5% of its energy needs via solar andwind generation (vii).Features of tech ETFs(Editor’s note: Do not read the following ideas as ETF recommendations. Dofurther research of your own or talk to a financial adviser before acting onthemes in this article).While investors can access exposure to technology in a range of ways, ETFs canbe an efficient means, via a single trade.Direct share investing in tech can be difficult in a few ways – for Australianinvestors, the technology sector is relatively concentrated, making itdifficult to manage risk through diversification.Buying international tech shares directly may be hard and costly for someinvestors. From this perspective, managed options can appeal, in particulartech ETFs.ETFs can offer cost-effective exposure to a large number of companies,including the “big tech names” that may otherwise be outside financial reach.Diversification across a large number of companies can be particularlyimportant as a risk-management strategy in more niche technology industriessuch as robotics and automation, or more high-risk industries likebiotechnology.This can be achieved through investments such as ETFS ROBO Global Robotics andAutomation ETF or the ETFS S&P Biotech ETF (ASX: CURE). ETFs usually havelower fees than actively managed funds.ETFs are typically transparent, easy to use and liquid, allowing investors tosee what they hold and trade as they need. For investors keen to incorporatespecific companies, such as Apple, being able to see the exact holdings of anETF can be helpful.Top 10 Largest Technology ETFs: Riding the Tech WaveWhat are the largest technology ETFs? Technology companies are dominating thestock market, and of course, the world. With the rise of artificialintelligence, machine learning, and other futuristic technologies, techcompanies are expected to play an even bigger role in our lives. If you arebullish on the tech sector, technology ETFs are one of the simplest andeasiest ways to gain exposure to a broad range of tech companies. Here we takea look at the top 10 largest technology ETFs listed in the US.Technology ETFs invest in the stocks of companies providing technologyhardware, software, and services. They include Apple, Amazon, Facebook,Microsoft, Cisco, Nvidia, and more. Some tech ETFs also have medical devicesstocks in their portfolio.Angelo Giampiccolo/Shutterstock.comThere are more than 80 technology ETFs in the US. When investing in ETFs, youshould look at their assets under management (AUM), trading volumes, andexpense ratios besides the index they track. ETFs with lower AUMs and tradingvolumes tend to have a wider spread, meaning there are huge swings in prices.A higher AUM also minimizes the tracking error. For these reasons, it makessense to invest in one of the largest technology ETFs.An ETF tracks a benchmark index. Instead of outperforming the index, the ETFaims to match its performance. ETFs are listed on a stock exchange and tradelike a regular stock. You can trade shares of an ETF throughout the tradingday. But this ability to buy and sell shares throughout the day could shiftyour focus from long-term investing to short-term gains.
5- iShares U.S. Technology ETF (IYW), $4.8 billion
Launched in 2000, IYW tracks the performance of the Dow Jones U.S. TechnologyCapped Index. The ETF has $4.8 billion in assets. Its expense ratio is 0.42%.IYW invests primarily in the US technology stocks. Its largest holdings areMicrosoft, Apple, Google, Facebook (FB), and Intel (INTC). The ETF hasdelivered an impressive 18.54% annualized return over the last five years.
3- Vanguard Information Technology ETF (VGT), $26.3 billion
Just like most other Vanguard funds, VGT has a pretty low expense ratio ofjust 0.10%. It tracks the performance of the MSCI US IMI InformationTechnology 25/50 Index. It has invested in more than 300 US technology stocks.VGT’s largest holdings are Apple, Microsoft, Visa, Mastercard, and Intel. Thetop ten holdings have a staggering 57.8% weightage in its portfolio.
2- Technology Select Sector SPDR Fund (XLK), $26.7 billion
XLK is one of the most popular technology ETFs among the American investors.Launched in 1998, the ETF has an expense ratio of just 0.13%. It tracks theperformance of the Technology Select Sector Index, which represents thetechnology and telecom sectors within the S&P 500 index. The ETF gives youexposure to technology hardware, software, communications, semiconductors, andIT services companies.