When it comes to finding growth, the technology sector is often the place most investors go. After all, the sector is just ripe with fast-moving, high revenue generating companies. Over time, investing in tech stocks has resulted in some pretty great gains for investors. After all, given the volatility associated with the technology sector, most investors these days choose to use tech exchange-traded funds to get their fix.
And when it comes to tech ETFs, investors normally choose the Technology SPDR (ETF) (NYSEARCA:XLK). With more than $16.5 billion dollars in assets and large trading volumes, the XLK has become the top tech ETF.
But it’s not the only one out there. There are more than 50 tech ETFs currently out there. Investors just using the XLK for ease of use may be missing the sector’s best bets and biggest opportunities.
With that in mind, here are three ignored tech ETFs that are too good to pass up.
Best Tech ETFs to Buy: First Trust DJ Internet Index Fund (ETF) (FDN)
Expenses: 0.54%, or $54 per $10,000 invested
While tech encompass a lot of areas, the internet is where most of the growth is coming from. From e-commerce to social media, the internet continues to change how we function in society.
And that’s why the First Trust DJ Internet Index Fund (ETF) (NYSEARCA:FDN) should feature a prominent place in your portfolio.
FDN tracks the Dow Jones Internet Composite Index, which is essentially a measure of all the large-cap internet-focused firms in the United States. You’re getting search/advertising giants like Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL), travel sites like Expedia Inc (NASDAQ:EXPE) and even online brokers like TD Ameritrade Holding Corp. (NASDAQ:AMTD). If it operates a website and derives the bulk of its revenues from that site, then FDN has it.
The real benefit of that focus has been FDN’s returns.
Since launching in 2008, FDN has had a staggering cumulative return of 344%. That works out to be around 14.08% annually. Moreover, that performance crushes the broader XLK, which only returned about 9% annually in that time.
Add in FDN’s low expense ratio of 0.54%, and you have one of the best tech ETFs to buy.
Best Tech ETFs to Buy: iShares Exponential Technologies ETF (XT)
The tech sector is always at the forefront of innovation. The problem is, when you’re looking into the future, you’re not exactly sure what’s going to stick. For every cloud computing, there are VR headsets.
To play the upcoming decades right, you could cobble together a stock or two from each hottest trend and see if they make or it. Or you could just buy one of the tech ETFs that bet on “exponential” technology.
As the first and oldest fund in the sector, the iShares Exponential Technologies ETF (NYSEARCA:XT) should be first on your list.
The $900 million ETF, invests in the newest of the new. That includes various technology sub-themes like cloud computing, robotics, bioinformatics, nanotechnology and more. In total, the ETF owns nearly 200 different cutting-edge tech firms. But here’s the real beauty, XT isn’t just focused on “tech” companies. Healthcare, industrial and even consumer discretionary stocks make their way into the ETF. This allows investors to participate across the board of firms offering high-tech solutions in their respective industries.
In the end, XT could be one of the best tech ETFs for long-term investors to own as these cutting-edge ideas take hold.
Best Tech ETFs to Buy: Guggenheim China Technology ETF (CQQQ)
What happens when you combine one of the fastest growing sectors in the market with one of the fastest growing nations? You get a recipe for long-term success.
The Guggenheim China Technology ETF (NYSEARCA:CQQQ) seems like an odd choice in that it tracks 74 Chinese technology stocks. But believe me, this is one of the tech ETFs that should be on your list. China really is a tech powerhouse and it is as much about technology as the U.S.
For starters, the nation boasts one of the largest mobile phone and internet user bases in the world. This has helped it curate a rich ecosystem devoted to online gaming, shopping and entertainment. Ever hear the names Alibaba Group Holding Ltd (NYSE:BABA) or Ctrip.Com International Ltd (ADR) (NASDAQ:CTRP)? Thought so.
Meanwhile, many Chinese hardware brands are becoming staples across the world. Think Lenovo Group Limited (ADR) (OTCMKTS:LNVGY) for computers or Huawei for smartphones and other gadgets. The nation is a dominant solar panel and semiconductor producer … the list goes on and on.
As a result, CQQQ could be a great long-term play as China emerges and becomes a ‘superpower’ — one that runs on a hefty dose of tech.
As of this writing, Aaron Levitt was long XT.