The technology sector is not only the largest sector in the S&P 500, but it is also the best-performing group in the benchmark U.S. equity gauge. Just look at the Technology Select Sector SPDR Fund (NYSEARCA:XLK). XLK, the largest technology exchange-traded fund, is up 16.6% year-to-date, more than double the 7.8% returned by the S&P 500.
Technology ETFs like XLK are familiar stomping grounds for investors seeking broad exposure to tech stocks.
Big technology sector ETFs like XLK usually have low fees, are highly liquid and are heavily allocated to storied tech stocks such as Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT) and Facebook Inc (NASDAQ:FB).
In other words, many of the largest technology ETFs serve as solid ideas for investors looking for easy exposure to the largest tech stocks. Investors that are willing to get a little more tactical with the technology sector can reap big rewards with some focused technology ETFs.
Consider some of the following funds for accessing tech stocks in a way that goes beyond the usual, old school strategies.
Technology ETFs to Buy: First Trust Nasdaq-100- Technology Ix Fd (QTEC)
Expense Ratio: 0.6%, or $60 annually on a $10,000 investment
As its name implies, the First Trust First Trust Nasdaq-100- Technology Ix Fd (NASDAQ:QTEC) is a Nasdaq-100 ETF, but it follows an index that is a derivative of the widely followed Nasdaq-100.
The First Trust Nasdaq-100-Technology Sector Index Fund tracks the Nasdaq-100 Technology Sector Index, which is essentially the all-tech answer to the already tech-heavy Nasdaq-100.
In addition to tech stocks, the traditional Nasdaq-100 features exposure to healthcare and consumer discretionary names, among others. But QTEC is all tech stocks all the time. Interestingly, this technology ETF holds just 35 stocks. Investors should also note that FTEC’s holdings are equally weighted, so tech stocks like Apple Inc. (NASDAQ:AAPL) and Facebook Inc (NASDAQ:FB) do not dominate this fund. In fact, this technology ETF allocates just 3% of its weight to Apple.
The methodology works as evidenced by QTEC hitting a record high earlier this week. Over the last three years, QTEC is up 77.1% compared to a 61% gain for the standard Nasdaq-100, but this technology ETF has been slightly more volatile and its 0.6% annual fee well is well above average for U.S.-focused broad market strategies or technology sector funds.
Technology ETFs to Buy: FactorShares Trust PureFunds Video Game Tech ETF (GAMR)
Expense Ratio: 0.75%
Every year, there are ETFs that come to market that labeled as niche funds. Sometimes, critics will even say these products are too much of a good thing. Some naysayers probably levied such complaints against the FactorShares Trust PureFunds Video Game Tech ETF (NYSEARCA:GAMR) when it debuted in March 2016.
To its credit, this technology ETF is validating itself, at least when it comes to performance. Video games are fun, but the tech stocks found in GAMR are delivering a serious year-to-date showing. Serious as in this technology sector fund is up more than 32% this year after hitting a record high earlier this week.
For most investors, GAMR is best used as a complement to a more traditional technology ETF like an XLK or even the aforementioned QTEC. Still, the PureFunds Video Game Tech ETF holds some familiar U.S. tech stocks, including Apple, Microsoft Corporation (NASDAQ:MSFT) and Intel Corporation (NASDAQ:INTC).
Technology ETFs to Buy: SPDR Morgan Stanley Technology (ETF) (MTK)
Expense Ratio: 0.35%
Perhaps by virtue of hailing from the same fund family as XLK, the SPDR Morgan Stanley Technology ETF often goes overlooked among technology ETFs.
However, this avenue to tech stocks is neither new nor small. MTK is almost 17 years old and has nearly $710 million in assets under management.
MTK holds 37 stocks, none of which command weights north of 3.7%. While 37 tech stocks in one ETF does not sound like a lot, this technology ETF features exposure to nearly a dozen industry groups.
MTK is up 21.6% year-to-date and over the last three years, this technology ETF has outperformed XLK and the Nasdaq-100, while being only slightly more volatile.
As of this writing, Todd Shriber did not hold a position in any of the aforementioned securities.
