How to invest in tech ETFs

There have been some big winners in the tech sector in recent years, but there have also been plenty of turmoil. Especially during the market downturn of 2022, many investors were afraid to pick individual tech stocks.

That’s where ETF investing comes in. There are some good ETFs of his that focus on the tech sector as a whole or specific parts of it. They provide exposure to the potential technology space within the portfolio without the risks associated with investing in individual companies. In this article, we discuss seven top technology ETFs that are worth a look for investors looking to add exposure to diverse technologies to their portfolios.

7 Top Technology ETFs to Consider

Let’s take a closer look at each of these exchange-traded funds.

1. Vanguard Information Technology ETF

Vanguard is known for its low-cost index funds, and the Vanguard Information Technology ETF certainly falls into this category, with the lowest expense ratio of 0.10%. That means for every $10,000 invested, the annual endowment cost is only $10.

The ETF tracks a broad index composed of US technology companies of all sizes and, as a market cap-weighted ETF, top holdings include companies such as: apple (NASDAQ:AAPL), microsoft (NASDAQ:MSFT), and NVIDIA (NASDAQ: NVDA). In short, ETFs are an excellent choice for investors who want a set-and-forget method to invest in the entire information technology sector.

2. Technology Select Sector SPDR ETF

The Technology Select Sector SPDR ETF is very similar to Vanguard funds. They have similar asset sizes, the same expense ratio of 0.10%, and track very similar indices. In fact, the fund’s top holdings are the same as the Vanguard example.

Vanguard and Technology Select are two very similar ETFs for broad exposure to the information technology sector, and it’s hard to declare one better than the other. Investors who want to invest in “tech stocks” can’t go wrong with that either.

3. VanEck Semiconductor ETF

We are currently discussing specific ways to invest in technology stocks through ETFs. The VanEck Semiconductor ETF tracks an index of semiconductor (chip makers) manufacturers. Nvidia is the top holding company, taiwan semiconductor (NYSE:TSM), broadcom (Nasdaq: BRCM), Texas Instruments (NYSE:TXN), and Applied Materials (NASDAQ:AMAT), just to name a few.

The ETF has a slightly higher expense ratio of 0.35%, but it is important to note that investors should expect to pay a little more for such a specialized ETF.

4. iShares Cybersecurity and Tech ETF

With high-profile data breaches seemingly happening every other week, threats (especially in the cloud) are getting more sophisticated. Investing in cybersecurity stocks can be an interesting opportunity for the patient long-term investor, and the iShares Cybersecurity and Tech ETF allows you to focus your money on this technology subsector.

The ETF’s expense ratio of 0.47% is on par with other ETFs of similar size and expertise. It aims to track an index of cybersecurity stocks. Booz Allen Hamilton (NYSE:BAH), Juniper Networks (NASDAQ:JNPR), Palo Alto Networks (NASDAQ:PANW) and many other familiar names.

5. Invesco QQQ ETF

No discussion of tech ETFs would be complete without the Invesco QQQ ETF, by far the largest exchange-traded fund that tracks the Nasdaq.

The QQQ ETF has a relatively low expense ratio of 0.20% and tracks the NASDAQ 100 Index. The NASDAQ 100 Index is essentially an index of the largest stocks listed on the Nasdaq Exchange. QQQ ETF is not a pure technology ETF. It’s very technically heavy. Approximately 48% of the fund’s assets are invested in the technology sector, with a further 15% invested in telecommunications stocks. Apple, Microsoft, and Amazon (NASDAQ: AMZN), alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG), and Tesla (NASDAQ: TSLA).

The Invesco QQQ ETF may be suitable for investors who want passive exposure to technology-focused portfolios, but do not want to rely solely on the technology sector.

6. Invesco S&P 500 Equal Weight Technology ETF

One of the main risk factors for the five ETFs discussed so far is that they are top-heavy. They’re weighted by market cap, and they’re very concentrated in just a few stocks because there are some blue chip tech stocks with trillions of dollars in market cap.As an example, Apple over 20 We discuss both the Vanguard ETF and the SPDR ETF mentioned above.

The Invesco S&P 500 Equal Weight Technology ETF aims to create a truly diversified basket of technology stocks by allocating equal amounts of assets to all companies in the index it tracks. In other words, relatively small companies in the index. Hewlett Packard Enterprise (NYSE:HPE) gets the same visibility as big companies like Nvidia. An expense ratio of 0.40% is very reasonable and may be a smart choice for investors who don’t want to rely too heavily on the success of a single company to generate a return on their investment.

7. Ark Innovation ETF

The first six ETFs all have one big thing in common. They are all passive funds. In other words, they are all designed to simply track a stock’s index and match its performance over time.

In contrast, the ARK Innovation ETF is actively managed by prominent investor Kathy Wood and her team and is designed to tap into innovative and rapidly growing technology companies. Currently, his five largest holdings in the fund are: zoom (NASDAQ:ZM), Tesla, Roku (NASDAQ:ROKU), exact science (NASDAQ:EXAS), and block (NYSE: SQ).

The ARK Innovation ETF seeks to outperform the technology sector as a whole by allowing the fund’s assets to be invested in whatever opportunities are most attractive at any given time. Of course, his 2022 for this fund hasn’t exactly been a great year. But if you’re looking for the potential to outperform the market, his ETF is worth a closer look.

The Conclusion of Investing in Tech ETFs

As you can see, not all tech ETFs are the same. Some track a broad index of technology companies, some track a basket of more specialized stocks, and some take an actively managed approach. If you’re looking to add more technical exposures to your portfolio, the best thing to do is compare each one to see which one best suits your goals and risk tolerance.