Technology is altering the way we live our daily lives and that’s true across a variety of scenarios. Whether it’s how we communicate, conduct business, shop or travel — just to name a few — technology is delivering seismic shifts, a theme that will continue in the years ahead.
Fortunately, a growing number of exchange-traded funds provide investors with access to the tech disruption of tomorrow, today. Many of these new-age funds aren’t necessarily new themselves and have established tracks. Many do admirable jobs of mixing in exposure to familiar mega-caps, including the Microsoft’s (NASDAQ:MSFT) and the Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) of the world along with lesser known, high growth fare.
Here are some of the best disruptive ETFs investors should consider when searching for legitimate technology disruption.
Disruptive ETFs to Consider: ALPS Disruptive Technologies ETF (DTEC)
Expense Ratio: 0.50%, or $50 annually per $10,000 invested
Many investors want exposure to the newest technologies but can’t decide on which segment to focus on. That’s where the ALPS Disruptive Technologies ETF (CBOE:DTEC) comes in. This fund equally weights 10 disruptive themes and its equity holdings are also equally weighted. That means single stock risk is minimal within this fund.
The themes featured in DTEC are as follows: cloud computing, data and analytics, clean energy and smart grid, mobile payments, fintech, healthcare innovation, 3D printing, artificial intelligence and robotics, cybersecurity and Internet of Things (IoT).
DTEC follows the Indxx Disruptive Technologies Index, which mandates that member firms generate a minimum of half their revenue from at least one technology or theme deemed to be disruptive.
Obviously, DTEC is a growth fund, meaning investors will pay up on valuation, but the good news is the ETF isn’t pricey relative to historical averages. At the end of January, DTEC’s index resided at 39.03x earnings and 21.11x cash flow compared to historical averages of 51.64x and 22.94x, respectively, according to issuer data.
Global X Internet of Things ETF (SNSR)
Expense Ratio: 0.68% per year
The Global X Internet of Things ETF (NASDAQ:SNSR), which follows the Indxx Global Internet of Things Thematic Index, seizes upon a theme investors are hearing more and more about: connectivity. Whether it be via 5G, smart devices or other avenues, the world is becoming increasingly connected with some market observers estimating that over the next several years, tens of billions of devices, if not more, will be connected.
SNSR is at the forefront of some seismic societal shifts as well as significant investment implications.
“With the increased connectivity of people and things, virtually every industry on the planet will be hugely impacted. Some obvious ones include manufacturing, mobility and healthcare,” said Robert Siegel, lecturer in management at Stanford Graduate School of Business, in remarks emailed to InvestorPlace. “The ability to make things with speed and scale will drive large scale but simultaneously customized manufacturing of items ranging from clothing to retail to food (yes, food!).”
Although the IoT theme appears nuanced, it’s actually sprawling and SNSR’s 50 holdings reach across this universe, focusing on segments, including “the development and manufacturing of semiconductors and sensors, integrated products and solutions, and applications serving smart grids, smart homes, connected cars, and the industrial internet,” according to Global X.
ARK Autonomous Technology & Robotics ETF (ARKQ)
Expense Ratio: 0.75%
The ARK Autonomous Technology & Robotics ETF (NYSEARCA:ARKQ) is often mention as one of the ETFs with the largest weight to Tesla (NASDAQ:TSLA) and while it’s true ARKQ devotes 11.35% of its weight to that stock, there’s much more to this disruptive tech fund.
As its name implies, ARKQ features exposure to the fast-growing automation and robotics segments, but this is a multi-theme product that touches the 3D printing, autonomous transportation, clean energy and space exploration markets. AKRQ is actively managed so it can adjust within themes as the managers see fit, potentially benefiting investors over the long-term.
ARKQ’s weight in TSLA coupled with robust automation exposure lever the fund to some thrilling and potentially lucrative technological advances and themes.
“Cars will become moving collections of sensors which will impact traffic, entertainment (in and out of the vehicle) and hospitality. Information about people’s real-time health conditions will allow people to live longer and healthier lives all over the world,” said Stanford’s Siegel. “How these goods and services are delivered will touch all parts of the value chain for companies and individuals — from how products are built to how companies are organized.”
ROBO Global Healthcare Technology and Innovation ETF (HTEC)
Expense Ratio: 0.68%
Healthcare is often seen as a sleepy, defensive sector, but in the reality is an epicenter of disruption and the ROBO Global Healthcare Technology and Innovation ETF (NYSEARCA:HTEC) is one way of capitalizing on that trend.
“Healthcare is undergoing a dramatic, technology-driven revolution,” according to ROBO Global, HTEC’s issuer. “The convergence of robotics, machine intelligence and life sciences has enabled breakthrough advances from AI-powered diagnostic to minimally invasive robotic surgery, from molecular analysis to DNA sequencing and genetic cancer therapies, from 3D printed implants to virtual care visits.”
HTEC offers investor a level of disruptive purity because there are qualifiers for admittance into this fund, including a requisite on how much revenue a company generates from innovative healthcare technologies and products as well as a firm’s position within these new markets.
With HTEC investors get a fund that’s light on blue-chip pharmaceuticals and more heavily allocated to “growthier” biotechnology, medical device and life sciences firms, among others.
Global X Cybersecurity ETF (BUG)
Expense Ratio: 0.50%
The Global X Cybersecurity ETF (NASDAQ:BUG) debuted last October as the newest cybersecurity ETF and it has one primary advantage of its more established rival: a lower fee. BUG is 10 basis points per year less expensive than the largest ETF in this category.
Perhaps the most frequently mentioned catalyst as it pertains to cybersecurity stocks and funds is spending trends among companies and government. Fortunately for investors considering BUG, that thesis is alive and well. In 2017, cybersecurity spending was $120 billion, up from just $3.5 billion in 2004, but that figure is poised to swell to $1 trillion over the next couple of years.
Another interesting trait about BUG’s 30 holdings is that they have an average market value of $4.85 billion, putting the fund firmly in mid-cap territory. That’s relevant because many observers believe there are too many cybersecurity companies and that the industry is ripe for consolidation. At that tolerable market cap, plenty of BUG components could be takeover targets in the future.
Overall, BUG is a solid idea among disruptive funds for investors looking to focus on a particular theme and one backed by credible fundamentals.
Todd Shriber has been an InvestorPlace contributor since 2014. As of this writing, he did not hold a position in any of the aforementioned securities.