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For investors interested in gaining exposure to technology, there are several well-known exchange-traded funds (ETFs) that can be beneficial. The Invesco QQQ Trust (NASDAQ: QQQ) is a prominent option, particularly as it tracks the Nasdaq-100. Additionally, numerous technology-focused ETFs manage substantial assets, making them accessible to a wide range of investors.
However, for those looking to target particular technology sectors or diversify beyond traditional tech companies, two innovative ETFs are worth considering.
Gaining semiconductor exposure without picking individual stocks
The semiconductor industry has garnered significant investor interest, fueled in part by the rapid success of companies like Nvidia (NVDA -0.03%). With advancements in artificial intelligence, cloud computing, and consumer electronics, the demand for cutting-edge semiconductor technology is poised to grow in the foreseeable future.
Yet, identifying which companies will emerge as dominant players in this competitive arena can be challenging. To mitigate this risk, the iShares Semiconductor ETF (SOXX 1.79%) provides a strategic way to invest in a diverse range of semiconductor firms. This ETF tracks an index that encompasses 35 semiconductor manufacturers and related businesses.
Nvidia is among the top holdings within this fund, but the structure ensures that no single stock exceeds 10% of the portfolio, which helps distribute risk. Broadcom is currently the leading position, followed closely by Nvidia, with other significant holdings including AMD, Applied Materials, Qualcomm, and Monolithic Power Systems.
For investors who subscribe to the idea of broad market trends benefiting all players, this ETF could serve as a compelling option, with a reasonable expense ratio of 0.35% for a specialized fund.
Exploring beyond the technology sector
While some investors focus on technology exposure through traditional ETFs, not all companies that drive innovation are classified within the tech sector itself. For instance, Netflix (NASDAQ: NFLX) falls under the communication sector, along with many social media entities.
The iShares Expanded Tech Sector ETF (IGM 0.65%) is an alternative that could complement an investment portfolio effectively. This ETF follows an index that largely consists of tech sector firms, while also capturing technology-related companies that are categorized under communications and consumer discretionary sectors.
In addition to Netflix, notable holdings include Meta Platforms, Alphabet (Google), Electronic Arts, and Roblox. Although these companies are perceived as tech-oriented, they may not be included in a standard information technology index fund.
One consideration for potential investors is the ETF’s expense ratio of 0.41%, which may be higher compared to some technology sector alternatives. For example, the Vanguard Information Technology Sector ETF (VGT 0.59%) has a notably lower fee of just 0.10%, though it lacks exposure to the aforementioned companies.
Evaluating your investment strategy
Ultimately, the ideal ETF varies by individual investor’s goals, with few exceptions—typically, a basic, low-cost S&P 500 ETF fits a broad audience. With a multitude of affordable ETFs available, selecting the right match for your investment strategy is essential.
The two ETFs mentioned provide solid pathways for those wishing to engage with technology markets without the complexity of stock selection. Whether aiming for semiconductor exposure or a broader tech investment, these options may align well with investor expectations. Nonetheless, it’s prudent to compare these choices with other alternatives, as thorough research is vital when investing in ETFs.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Matt Frankel has positions in Roblox. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Applied Materials, Meta Platforms, Netflix, Nvidia, Qualcomm, Roblox, and iShares Trust – iShares Semiconductor ETF. The Motley Fool recommends Broadcom and Electronic Arts. The Motley Fool has a disclosure policy.
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