Tech stocks and related tech ETFs have made a tremendous recovery in 2023 following last year’s bear market. With valuations back on the upswing, investors should be judicious in picking the best tech funds going forward to ensure they get good value for their purchases.
These three tech ETFs give investors exposure to much more than just the mega-cap tech titans. In doing so, they offer investors access to many smaller and faster-growing tech firms along with some sharply discounted companies today and even a potential income kicker on top. Let’s dive into these three top tech ETFs for September 2023.
Invesco S&P 500 Equal Weight Technology ETF (RSPT)
One big concern investors often have with tech funds is that they have too much exposure to the tech titans. The FAANG stocks — or whatever acronym you want to use today — have come to dominate the overall Nasdaq index.
The Invesco S&P 500 Equal Weight Technology ETF (NYSEARCA:RSPT), which uses an equal weighting approach to its portfolio, allows investors to get broad tech exposure without going all-in on the tech titans. Other funds, like the Invesco QQQ Trust ETF (NASDAQ:QQQ), have the top five companies making up more than 36% of the entire index. In other words, an investor buying into the well-known tech ETF may be getting way more Apple (NASDAQ:AAPL) or Microsoft (NASDAQ:MSFT) exposure than they expected. Given the valuation concerns around several of the large tech companies today, there is reason to think that smaller and more nimble tech firms will outperform going forward.
RSPT owns all the technology companies which make up the S&P 500, which is currently approximately 68 firms. Each of these 68 companies makes up about 1.5% of the entire portfolio. Smaller and, in my opinion, more promising firms such as EPAM Systems (NYSE:EPAM) and CDW Corp (NYSE:CDW) get equal weighting in the portfolio to firms like Apple and Microsoft. Given the tendency for smaller firms to have more growth potential, this equal weight approach should serve tech investors well.
Nasdaq Technology Dividend Index ETF (TDIV)
Another common complaint with tech stock ETFs is that they barely offer any dividends.
Capital gains are wonderful, of course. But investors often buy ETFs to get a solid income stream as well. Enter the First Trust Nasdaq Technology Dividend Index ETF (NYSEARCA:TDIV), which accounts for this issue.
TDIV owns 92 different dividend-paying technology companies. It gives investors wide diversification within that category, covering everything from software and semiconductors to hardware, communications and networking equipment.
TDIV shares currently offer a 1.88% dividend yield. That’s not a huge sum, but it is ahead of the S&P 500 Index as a whole, and it’s far ahead of the Nasdaq 100’s yield. Want tech stocks with a healthy dollop of yield on top? Look no further.
ETFMG Prime Mobile Payments ETF (IPAY)
Another of the best tech funds for September 2023 is the ETFMG Prime Mobile Payments ETF (NYSEARCA:IPAY).
The payments industry has underperformed over the past 18 months as adoption has slowed down after the e-commerce boom during the early days of the pandemic. That, combined with deflating valuation ratios, have led to a full-on collapse in stock prices across many companies in the industry.
This makes it a great time to add IPAY shares during this lull. IPAY is down about 40% from its 2021 peak, and shares are merely flat over the past year despite the sharp rally in other parts of the tech ecosystem. This gives IPAY shares plenty of room to catch up going forward.
IPAY also gives investors exposure across the financial technology space. Top ten holdings include a broad spectrum ranging from credit card issuers to merchant processors and even fast-moving FinTech payments players such as Uruguay’s dLocal (NASDAQ:DLO). This gives investors a nice mix of stable payments giants and some nimble disruptors within the same tech ETF package.
On the date of publication, Ian Bezek held a long position in EPAM stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
