While picking individual market ideas may offer the biggest chance for upside, the process carries risks, which is where the best tech ETFs to buy may earn their keep. Fundamentally, exchange-traded funds offer a broad range of stocks under one basket, thus limiting risk while maximizing success. Further, focusing on innovative sectors like technology may yield compelling opportunities.
That said, humans have their own limitations regarding researching which funds may be the best tech ETFs to buy. Therefore, I decided to give ChatGPT a whirl and asked it for seven tech-related ETFs that offer diversified exposure. The below names are exactly what the artificial intelligence protocol provided in the order you see.
|XLK||Technology Select Sector SPDR Fund||$151.01|
|VGT||Vanguard Information Technology Index Fund||$385.47|
|IXN||iShares Global Tech ETF||$54.36|
|FDN||First Trust Dow Jones Internet Index Fund||$147.85|
|QQQ||Invesco QQQ Trust Series 1||$320.93|
|BOTZ||Global X Robotics and Artificial Intelligence||$25.50|
|ARKK||ARK Innovation ETF||$40.34|
Technology Select Sector SPDR Fund (XLK)
According to ChatGPT, the Technology Select Sector SPDR Fund (NYSEARCA:XLK) tracks the performance of the Technology Select Sector Index, which includes companies in the technology sector of the S&P 500. Since the Jan. opener, the XLK got off to a blistering start, gaining nearly 21% of market value. However, for the year, it’s down more than 6%.
Still, the XLK may rank among the best tech ETFs for broad exposure to the innovation space. For example, the top three holdings of the fund are Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), and Nvidia (NASDAQ:NVDA). Notably, the former two enterprises feature a weighting of 23.76% and 22.79%. Therefore, unless you believe the biggest tech giants in the world are about to implode, XLK should be a safe bet.
In terms of expense, the XLK appeals to cost-conscious investors with an expense ratio of 0.1%. This compares very favorably to the category average of 0.56%.
Vanguard Information Technology ETF (VGT)
Per the AI protocol, the Vanguard Information Technology ETF (NYSEARCA:VGT) tracks the performance of the MSCI US Investable Market Information Technology 25/50 Index, which includes companies in the technology sector of the U.S. stock market. Since the beginning of the year, VGT gained nearly 20% of its market value. However, it’s worth pointing out that the ETF dipped 9% in the trailing year.
As with the Technology Select Sector SPDR Fund, Vanguard Information features a heavy dosing of sector giants. Indeed, the top three holdings run almost identical to XLK’s: Apple, Microsoft, and Nvidia. Further, the former two enterprises carry the load for the VGT, with net weightings of 22.32% and 17.12%, respectively.
However, VGT distinguishes itself with exposure to the financial services sector. While the XLK is 100% dedicated to technology, VGT throws a bone to financial services (7.12% weighting) and industrials (1.76%). Therefore, it’s a more diverse play among the best tech ETFs to buy. Lastly, VGT features an expense ratio of 0.1%, which is relatively cheap.
iShares Global Tech ETF (IXN)
As ChatGPT stated, the iShares Global Tech ETF (NYSEARCA:IXN) tracks the performance of the S&P Global 1200 Information Technology Sector Index, which includes companies in the technology sector of global stock markets. Like the other names among the best tech ETFs to buy, IXN got off to a strong start in 2023. Since the Jan. opener, it popped up nearly 21%.
However, IXN also dipped roughly 8% in the past 365 days, something to watch for prospective investors. As with Vanguard Information Technology, IXN caters to tech heavyweights. Its top three holdings are Apple, Microsoft, and Nvidia. On a familiar theme, Apple and Microsoft make up the bulk of the ETF, with weightings of 22.27% and 19.52%, respectively.
What makes IXN slightly more distinct than other AI-recommended entries for best tech ETFs to buy centers on diversification. The IXN happens to throw a bone (a very small bone) to industrials with a 0.49% weighting. Still, investors should watch the expense ratio of 0.4%, which is a bit high compared to the category average of 0.56%.
First Trust Dow Jones Internet Index Fund (FDN)
Per ChatGPT, the First Trust Dow Jones Internet Index Fund (NYSEARCA:FDN) tracks the performance of the Dow Jones Internet Composite Index, which includes companies that generate at least 50% of their revenue from the internet. Since the January opener, FDN gained almost 17% of its market value. However, it fell more than 23% in the trailing one-year period.
For speculators, this might make a case for the best tech ETFs to buy on a relative “chart” discount. Contextually, FDN represents a fund that aims to swing for the fences. Its top three holdings are Amazon (NASDAQ:AMZN), Meta Platforms (NASDAQ:META), and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL).
Of course, the risk factor here centers on the volatility of the three innovators. At the same time, according to TipRanks, all three feature consensus buy ratings. For Amazon and Alphabet, the consensus stands as a strong buy. Although FDN entices with its upside potential, keep in mind that its expense ratio runs warm at 0.51%. Again, the category average comes out to 0.56%.
Invesco QQQ Trust (QQQ)
From ChatGPT, the Invesco QQQ Trust (NASDAQ:QQQ) tracks the performance of the Nasdaq 100 index, which includes 100 of the largest non-financial companies listed on the Nasdaq stock exchange. Since the beginning of this year, QQQ managed an outstanding performance, gaining over 19% of market value. However, it’s still recovering from the tech fallout of 2022. Since the trailing year, it’s down 13%.
For those seeking a wide canvas of innovative firms, the QQQ ETF stands among the best tech ETFs to buy for diversification. Yes, the top three holdings carry a familiar tune: Microsoft (at 12.52% net weighting), Apple (12.32%), and Amazon (6.19%). However, QQQ doesn’t exclusively (or near-exclusively) focus on the tech sector.
In fact, at the time of writing, the QQQ represents just under 50% of the fund’s weighting. Coming in second place stands the communications services industry at 16.3%. Rounding out the top three is consumer cyclical at 15%. Finally, the QQQ offers a discount in terms of its 0.2% expense ratio. That’s meaningfully under the category average of 0.54%.
Global X Robotics & Artificial Intelligence ETF (BOTZ)
According to ChatGPT, the Global X Robotics & Artificial Intelligence ETF (NASDAQ:BOTZ) tracks the performance of the Indxx Global Robotics & Artificial Intelligence Thematic Index, which includes companies involved in the development and production of robotics and artificial intelligence products and services. Since the January opener, BOTZ gained over 21% of its market value.
Before you get too excited, you should also note that BOTZ dipped nearly 14% in the past 365 days. Nevertheless, it’s easy to see why ChatGPT suggested BOTZ as one of the best tech ETFs to buy for diversification. Basically, the fund doesn’t just carry a wide canvas of tech-related enterprises. Instead, its specific focus aims at the robotics and automation sector.
In that regard, it’s quite diverse. While the tech segment commands 47.27% of the net weighting, the industrials, and healthcare make up the top three with weights of 35.62% and 14.82%, respectively. Also, BOTZ is geographically diverse, with significant exposure in the U.S. and Japan.
However, BOTZ presents a lofty cost profile with an expense ratio of 0.68%. That’s just under the category average of 0.69%.
ARK Innovation ETF (ARKK)
Finally, the AI protocol notes that the ARK Innovation ETF (NYSEARCA:ARKK) seeks to provide exposure to companies that are focused on disruptive innovation, including those involved in DNA technologies, robotics, energy storage, and more. Since the January opener, ARKK adopted a take-no-prisoners attitude, skyrocketing by over 26%. Nevertheless, it’s too early to celebrate as it also absorbed a 42% loss in the trailing year.
Understandably, ChatGPT selected ARKK as a candidate for best tech ETFs to buy for diversification because, well, it’s diverse. You can find the individual holdings here, which cover a wide range of relevancies. From electric vehicles to communication services to content streaming to cryptocurrencies, you can’t go wrong with ARKK if you’re primarily seeking a shotgun approach to the tech ecosystem.
However, ARKK represents a bold bet that could go awry based on broader economic circumstances. For instance, if monetary policy doesn’t play ball, cryptos may tumble. Therefore, it’s a high risk, high reward. If that appeals to you, more power to you. However, keep in mind that ARKK’s expense ratio runs extremely hot at 0.75%. Here, the category average sits at 0.46%.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.