Despite continued volatility and uncertainty, technology continues to drive the stock market higher. Technology stocks lead the way in terms of growth among equities, and they have gotten a big catalyst this year with the explosion of artificial intelligence (AI). However, separating winners from losers among technology stocks can be difficult. There are many different tech companies to choose from and multiple sub-sectors of technology, including wireless internet providers, cybersecurity firms, microchip and semiconductor designers and personal computer manufacturers — to name only a few categories. Given the diversity and choice available to investors, the best way to gain broad exposure to the tech sector while mitigating personal risk is through an exchange-traded fund (ETF). These are funds that track a particular index, often the Nasdaq, and let investors benefit from the growth of technology stocks without risking capital on one particular stock. Don’t miss the boom: Here are three tech funds set to explode higher.
Global X Artificial Intelligence & Technology ETF (AIQ)
AI continues to be the hottest corner of the technology sector, and the Global X Artificial Intelligence & Technology ETF (NASDAQ:AIQ) is a great way to play the boom. This fund offers broad exposure to companies heavily focused on AI. Believe it or not, this ETF has been around since 2018. It’s not a fund that sprung up earlier this year as excitement around AI technologies started to build.
Top holdings in the AIQ ETF include Alphabet (NASDAQ:GOOG/NASDAQ:GOOGL), Meta Platforms (NASDAQ:META) and IBM (NYSE:IBM). Investors also get exposure to China’s tech sector with this AI ETF as its holdings include stocks of companies such as Alibaba (NYSE:BABA) and Baidu (NASDAQ:BIDU). Year to date, AIQ is up 32%, which is on par with the Nasdaq index. Over five years, the fund has gained 68%. The expense ratio is high at 0.68%. Still, broad exposure to AI might be worth it.
Invesco QQQ Trust Series 1 (QQQ)
The Invesco QQQ Trust Series 1 (NASDAQ:QQQ) is arguably the best-known and most popular technology fund in America. The triple Qs, as the fund is known, is the second most traded exchange-traded fund (ETF) in the U.S., based on average daily trading volumes, and it is regularly voted the best-performing large-cap growth fund. Currently, the Q has $200 billion in assets under management. Created in 1999, the Invesco QQQ tracks the performance of the Nasdaq 100 index.
The popularity of the QQQ fund comes from the fact that it holds many top tech names, including Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Nvidia (NASDAQ:NVDA). However, the Q also includes other Nasdaq-listed companies that are not technology concerns, including PepsiCo (NASDAQ:PEP) and Costco Wholesale (NASDAQ:COST). The fund charges a management fee of 0.20%, which isn’t the cheapest around. But the performance is strong, with the QQQ up 34% year-to-date and up 90% over five years.
Vanguard Information Technology ETF (VGT)
Another great way to gain broad exposure to the U.S. technology sector is with the Vanguard Information Technology ETF (NYSEARCA:VGT). This fund has characteristics similar to the QQQ ETF in that it tracks leading American technology companies. While the fund doesn’t track the Nasdaq per se, its top holdings are nearly identical to the triple Q, with sizable positions in Apple, Microsoft and so on.
The advantage of the VGT ETF is its rock bottom fee of 0.10%, which is about as low as you’ll find in a technology ETF or any ETF for that matter. Vanguard is known for having the lowest fees among mutual funds and ETFs, which applies to its main technology fund. The performance of the Information Technology ETF is quite strong and mirrors the broader tech sector. This year, VGT is up 30%. Over the past five years, it has increased 102%. The fund also pays a quarterly dividend of 68 cents per share.
On the date of publication, Joel Baglole held long positions in AAPL, MSFT, GOOGL and NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
