Take a minute to look at how you go about your day. Do you book an Uber to commute to work? Watch your favourite shows on Netflix? Order household essentials on Amazon? Stay in touch with your friends and family through Facebook and Instagram? Use Microsoft Teams and Excel sheets at work? Do you, perhaps, notice a trend here?
Firstly, all of these are tech-based apps and platforms. Secondly, all of them are US-based. If so much of your day is spent consuming the services of these companies, and you know that’s true for most of those around you, wouldn’t it be prudent as an investor to invest in the stocks of these tech giants? Especially when tech stocks have given returns to investors like no other industry. Over the past 10 years, global tech majors such as Amazon, Netflix, Meta, Alphabet Inc, Apple have each given returns of over 500% to investors.
While you could look at investing individually in the stocks of these companies, a better way to go about it is by investing in Exchange Traded Funds (ETFs).
Why invest in ETFs?
An ETF is a financial security that tracks an index like the S&P 500, a sector like tech, a commodity like gold, or any other asset.
When investing in tech stocks, the edge that ETF gives you is an added layer of diversification to your investment portfolio. An ETF can invest in hundreds or thousands of stocks. Hence, instead of investing in stocks of one tech player, an ETF allows you to invest in all major tech players at the same time. This is beneficial because not all companies, even in the same industry, move in tandem. Take a look at the 3-month stock performance of Netflix and Amazon and you will know what we mean.
| Date/Stock | Netflix | Amazon |
| 6th March 2023 | $312.03 | $93.75 |
| 6th April 2023 | $339.33 | $102.06 |
| 5th May 2023 | $322.76 | $105.66 |
| 6th June 2023 | $399.29 | $126.61 |
Depending on the market conditions and business activities of a specific company, it may underperform but you will still be able to make money because other stocks in the ETF won’t be following suit. Hence, by investing in a tech ETF, you aren’t betting on the performance of just one company but the entire sector, thereby hedging risk. In addition to working as an excellent tool of risk management, ETFs also allow you to have access to multiple stocks at a lower expense ratio than mutual funds.
Top tech ETFs to invest in
Here’s a list of five of the best performing ETFs that allow you to add the stocks of global tech majors to your portfolio:
- VGT
The Vanguard Information Technology (VGT) ETF tracks the performance of the MSCI US Index which includes stocks of large and mid cap US companies from the information technology sector. These companies are primarily from three areas – software, consulting, and hardware – and the ETF comprises 90.84% of technology stocks and 6.89% of financial services stocks. Its top holdings include Apple Inc. (23.5%), Microsoft Corp. (19.3%), NVIDIA Corp (6.12%), Visa Inc. Class A (3.16%), and Salesforce, Inc. (1.75%).
YTD daily total return: 32.58%
- RYT
RYT ETF is designed to track the S&P 500 Information Technology Index. Unlike most other ETFs, RYT follows an equal-weighted strategy which means that it doesn’t invest heavily in tech companies with the biggest market capitalisation. Instead, it provides the companies included with approximately equal allocations and is a multi-cap ETF. This allows for a balanced exposure which may be more profitable in the long term. The industries included are computers and peripherals, internet equipment, office electronics and instruments, wireless telecommunication services, and more.
Expense ratio: 0.40%
YTD daily total return: 15.86%
- FTEC
The Fidelity MSCI Information Technology Index ETF tracks the MSCI US index and provides exposure to stocks of over 300 tech companies. Its holdings are dominated by Apple Inc. (22.33%), Microsoft Corp. (19.07%), and others similar to the VGT ETF. However, the FTEC ETF is a cheaper alternative when it comes to broad-based, large cap tech ETFs.
Expense ratio: 0.08%
YTD daily total return: 32.21%
- IGV
iShares Expanded Tech-Software Sector ETF (IGV) tracks the S&P North American Expanded Technology Software Index. This ETF specifically holds companies in the software industry instead of multiple sectors in the tech industry. Some of its top holdings include Adobe (8.96%), Microsoft Corp. (9.44%), Salesforce (9.07%), Oracle Corp. (7.98%), and Intuit Inc. (5.77%). It has a good mix of mega cap and medium cap software companies.
Expense ratio: 0.40%
YTD daily total return: 29.91%
- XLK
The XLK ETF tracks the Technology Selector Sector Index that includes companies from technology sectors such as hardware, software, semiconductors, IT services, and electronic equipment. Thus, this ETF’s major strength is that it doesn’t solely focus on one niche of the tech industry but provides exposure to companies across sectors. It primarily includes large cap tech companies.
Expense ratio: 0.10%
YTD daily total return: 33.64%
How to get started today
Time is money when it comes to investing because the more you wait, the more returns you lose out on. So, now that you know which are some of the top tech ETFs you can add to your portfolio, start investing in them with the help of Appreciate. Our app brings to you convenient one-click investing and you can choose from thousands of US stocks and ETFs. Our AI-based recommendations take into consideration your risk tolerance and financial goals and provide custom investing solutions. Log on to Appreciate to begin your wealth creation journey today!
