5 Best Tech ETFs to Buy in 2024 | Invest

The technology sector is off to a strong start in 2024, with the Nasdaq 100 Technology Sector Index up more than 10% year-to-date. This is not surprising given the rise of artificial intelligence and the increasing global dependence on technology.

Jason Werner, founder of Werner Financial and certified investment fiduciary, says technology is a resilient sector and will likely always be relevant given the current world. “Also, high-tech companies are known for their rapid growth structures, making them attractive for investors to add to their portfolios.”

But not all technology companies succeed, and trying to cherry-pick winners can become a loser’s game.

To make it easier, and to make sure you don’t miss out on all the fun exchange-traded funds and ETFs, we’ll let you own many of Big Tech’s biggest names under one ticker. Because ETFs can hold dozens or even hundreds of tech stocks, they can be a smart alternative to stock picking even in the best of times. However, finding the best tech ETF for your portfolio requires doing your research.

While technology is likely to continue to grow in our world, Warner says not all funds are guaranteed the same success. “We encourage investors to do their due diligence and research the specific fund and its underlying holdings before proceeding.”

If you think the future of technology is still bright, here are some top technology ETFs to consider in 2024.

high tech ETF expense ratio Year-to-date performance
Invesco QQQ Trust (ticker: QQQ) 0.20% 7.0%
Vanguard Information Technology ETF (VGT) 0.10% 6.4%
Invesco S&P 500 Equal Weight Technology ETF (RSPT) 0.40% 4.4%
First Trust Nasdaq Cybersecurity (CIBR) 0.59% 3.4%
First Trust Dow Jones Internet ETF (FDN) 0.52% 7.2%

When looking for a tech ETF, Warner says, “We always start with probably the most popular choice, which is the Invesco QQQ Trust ETF.”

Although not strictly a tech ETF, this $249 billion 5-star fund from Invesco is one of the five largest U.S. exchange-traded products and offers an incredibly liquid way to invest in the top tech stocks of 2024. It’s a high way. This fund uses the Nasdaq 100 Index, which includes approximately 100 of the largest companies on the Nasdaq Exchange, as its benchmark.

The index has always been technology-focused and excludes traditional US stocks such as JPMorgan Chase & Co. (JPM) and Johnson & Johnson (JNJ), which are listed on the New York Stock Exchange. This results in a technology-biased fund. Specifically, almost 58% of the company’s assets are in the technology sector, compared to his 29.5% in the S&P 500.

“QQQ has a strong track record of serving a diverse range of companies in the technology space,” Warner said.

Vanguard Information Technology ETF (VGT)

Perhaps the largest true sector-specific technology ETF is VGT, with approximately $71.9 billion in assets. Just as QQQ has the unique feature of incorporating stocks other than Big Tech’s mainstays, VGT conversely favors large-cap tech stocks by a large margin.

Thanks to a market-weighted system where larger companies make up the bulk of the portfolio, more than 60% of the fund’s total assets are accounted for by the top 10 alone, with Microsoft Inc. (MSFT) and Apple Inc. (AAPL) even more. It becomes. The difference between the two is over 40%.

On the plus side, this cutting-edge technology ETF is inexpensive, with fees of just 0.10% annually, or $10 per $10,000 invested. But obviously, there’s not much sophistication here.

That said, Morningstar’s research team is bullish on the fund, giving it 5 out of 5 stars and a gold medal, with researchers saying VGT outperforms its associated index and most of its peers over market cycles. This shows that they are the most confident.

Invesco S&P 500 Equal Weight Technology ETF (RSPT)

To avoid the dominance of tech sector giants within your fund, you may want to consider an equal weight ETF like RSPT.

An equal weight approach means the fund gives approximately the same weight to each holding, regardless of the size of the company. Capitalization-weighted indexes like the S&P 500 and its derivatives weight companies by size, so the largest companies make up a larger portion of the portfolio than smaller companies.

A look inside RSPT reveals that even the largest holding company, Nvidia Corporation (NVDA), only acquires 2.16% of the fund’s total assets. This equal-weighted approach resulted in a more diversified portfolio, with the top 10 holdings accounting for less than 19% of total assets.

So if you’re looking for a truly diversified strategy in tech with a reasonable expense ratio of just 0.4%, RSPT is worth a look.

First Trust Nasdaq Cybersecurity (CIBR)

If you want to focus on a specific area within the technology industry, cybersecurity is a good choice.

“Cybersecurity is becoming increasingly important from a corporate perspective, especially as we become more dependent on technology,” said Daniel Millan, principal investment advisor and managing partner at Cornerstone Financial Services in Southfield. “From a macro perspective, I have a bullish theory for the long term.” , Michigan.

When it comes to cybersecurity exposure, I like CIBR, which invests in companies involved in cybersecurity in the technology and industrial sectors. Only companies classified as cybersecurity companies by the Consumer Technology Association with a market capitalization of $500 million or more and a daily trading volume of $1 million or more over a three-month period are included. This criterion creates a portfolio of 32 stocks, most of which are classified as software companies.

CIBR itself has approximately $6.7 billion in total assets, making it the largest fund in the cybersecurity space with strong liquidity, Milan said.

First Trust Dow Jones Internet Fund (FDN)

New technology startups seem to be born every day, and no one can predict which ones will survive. For this reason, it makes sense to focus on larger, more established companies within the technology industry. For this purpose, Milan recommends his FDN.

“This fund provides broad exposure to large-cap oriented technology companies,” he says. “This is a strong choice for long-term investors looking to participate in the continued growth of technology dependence, as it offers broader exposure to the internet (and) technology sector as a whole than more concentrated funds. It will be.”

FDN’s portfolio includes 41 companies, many of which are big names you’re probably familiar with, such as Amazon.com Inc. (AMZN), Meta Platforms Inc. (META), and Netflix Inc. (NFLX). Companies in this selective portfolio are ranked based on three-month market capitalization and three-month average trading volume.

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