The Nasdaq is in the red for 2015, but that opens the door for opportunistic investors to snag some technology exchange-traded funds on the dip.
Although the tech-laden index is negative year-to-date, the bigger picture is that the Nasdaq is showing great resilience in the correction of 2015, as it is far ahead of the S&P 500 and the Dow Jones.
The supportive backdrop for technology stocks, and growth stocks in general, is that firms like Amazon (AMZN) and Netflix (NFLX) have compelling growth stories and can be potential momentum plays, even if their prices have surged this year.
And although global economies and an indecisive Fed are spooking investors, the U.S. economy is moderately strong and appears to be in the late-phase of the business cycle, when growth stocks tend to lead.
With that backdrop, here are three of the best technology ETFs to buy now.
3 Best Technology ETFs to Buy Now: Technology SPDR Fund (XLK)
Expense Ratio: 0.15%, or $15 for every $10,000 invested
If size, liquidity, diversification and expenses matter to you as it does with many other smart ETF investors, look no further than the biggest tech-sector ETF in the world, the Technology SPDR Fund (XLK).
Although XLK is a technology sector fund (tracking the S&P Technology Select Sector Index), it is broadly diversified across several tech subsectors, such as semiconductors, software, hardware, networking and Internet.
The portfolio consists of 74 tech stocks, with top holdings in Apple (AAPL), Microsoft (MSFT), Facebook (FB) and AT&T (T).
As for performance, don’t expect a broadly diversified tech-sector fund like XLK to beat its category peers consistently, but long-term ranks, including five-, 10- and 15-year returns are in the top third of technology funds. With that said, the year-to-date looks decent for XLK, with a 2.6% loss, which still beats more than half of tech-sector funds.
3 Best Technology ETFs to Buy Now: First Trust Dow Jones Internet Index Fund (FDN)
Expense Ratio: 0.54%
For investors expecting Internet companies to continue their dominance of the tech sector, First Trust Down Jones Internet Index Fund (FDN) may be the best choice.
A five-star rated fund, FDN is the largest dedicated Internet ETF on the market. FDN tracks the Dow Jones Internet Composite Index, which means FDN shareholders will get a concentrated portfolio of mostly large-cap U.S. Internet stocks.
Top holdings include Facebook, Amazon, Netflix and Salesforce.com (CRM).
The amazing year-to-date return of 11.5% for FDN reflects the resilience and strength of the tech sector in 2015. All performance ranks are impressive, highlighted by the first percentile rank for the three- and five-year returns.
3 Best Technology ETFs to Buy Now: PowerShares QQQ ETF (QQQ)
If you want a fund with healthy dose of tech stocks balanced with large-cap growth stocks in other sectors, you can’t get much better than the PowerShares QQQ ETF (QQQ).
Although QQQ does not focus completely on technology stocks, which were recently 54% of the portfolio, the growth areas of consumer cyclical, healthcare and communication sectors make for a more diversified holding that a pure tech-sector fund.
QQQ tracks the cap-weighted Nasdaq-100 Index, which includes the 100 largest non-financial stocks in the Nasdaq Composite Index. Top holdings naturally include Apple, Microsoft and Amazon.
Year-to-date, QQQ is one of the few large-cap stock funds with a positive gain. The five-year annualized return of 17.2% beats 95% of large-growth category peers, and the 10-year return of 11.2% ranks ahead of 99% of the category.
As of this writing, Kent Thune did not personally hold a position in any of the aforementioned securities. His No. 1 holding is his privately held investment advisory firm in Hilton Head Island, SC. Under no circumstances does this information represent a recommendation to buy or sell securities.
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