When it comes to technology index funds, the granddaddy of them all is Invesco QQQ Trust (ticker: QQQ). The Nasdaq 100 is in the spotlight. The Nasdaq 100 is not a pure investment, but it does define stock prices for many investors. Awareness of technology. Beating QQQ is a worthy goal, with the five-year stock price increase of 102.3% as of Aug. 30, nearly double the S&P 500’s 55.6%.
However, it is possible to defeat the mighty QQQ. At least for now, that’s the case, especially for some specialized funds that track semiconductor indexes.
Technology funds are not for the timid investor or those who need to turn their money into cash quickly. It could go up like it did this year, or it could go down sharply like in 2022. Many of his seven funds below track indexes that follow specific parts of the technology sector, and at any given time he may find one industry hot. Others, on the other hand, are cool. Semiconductors are an industry in the spotlight this year, driven by a rush to develop technologies such as artificial intelligence, cloud computing, and the Metaverse. Also, the software may become hot.
Of the 93 technology funds listed in VettaFi’s ETF database, there are enough candidates to beat the vaunted five-year return of QQQ to fill the shortlist. Some of them are listed below. Aniket Ullal, head of ETF data and analysis at CFRA Research, says QQQ also deserves mention as a fund that covers the sector broadly and provides exposure to set-it-and-forget-it technology.
“QQQ is an interesting option for investors interested in a broader definition of what constitutes a technology ETF,” Ural says.
The list below is primarily driven by the best returns over the past five years, as this is a period that will allow most investors to ride out upcoming market cycles. The best of them are worth keeping an eye on, as technology trends can change and this year’s popular semiconductor funds may be replaced by general technology and software funds. There’s also a place for his QQQ, which is concentrated in tech stocks but is also integrated into other parts of the U.S. economy.
Here are seven of the best tech index funds to buy right now.
| high tech index fund | expense ratio | Total return over 5 years |
| Van Eck Semiconductor ETF (SMH) | 0.35% | 203.9% |
| Vanguard Information Technology ETF (VGT) | 0.10% | 130.6% |
| SPDR S&P Semiconductor ETF (XSD) | 0.35% | 177.6% |
| iShares US Technology ETF (IYW) | 0.39% | 133.8% |
| Fidelity MSCI Information Technology Index ETF (FTEC) | 0.084% | 127.1% |
| iShares Enhanced Technology Software Sector ETF (IGV) | 0.41% | 79.2% |
| Invesco QQQ Trust (QQQ) | 0.20% | 109.1% |
Van Eck Semiconductor ETF (SMH)
The $10 billion fund is up 53% this year through Aug. 30, with a five-year total return (including the impact of dividends, splits and spinoffs) of 203.9%.. Tracking the MVIS US Listed Semiconductor 25 Index, this market cap weighted fund’s top holdings include Nvidia Corp. (NVDA), which accounts for over 20% of the fund; Taiwan Semiconductor Manufacturing (TSM), which accounts for over 10%; and Broadcom Inc. (AVGO). It’s just over 5%. The fund’s annual management fee is an affordable 0.35% of invested assets. No need to look for software or internet companies here. This is a pure tip fund.
Vanguard Information Technology ETF (VGT)
Another star fund, this $54 billion tech fund is up 130.6% over the past five years and about 40% in 2023. While many investors are eager to understand AI, the fund’s largest holding is Apple Inc. (AAPL), which has developed several products. The world’s most popular consumer technology device. Microsoft Corp. (MSFT) is next in line for the cloud computing boom, with Nvidia and Broadcom also top holdings. The fund invests across the tech subsector, tracking his MSCI US Investable Market Information Technology 25/50 Index, but its investments are highly concentrated in large stocks and far behind market-cap weighted funds. More than 42% of his money is invested in the top two stocks.
The expense ratio of the assets held is 0.1%, making it a relatively bargain fund. Like other tech funds, the firm does not own Amazon.com Inc. (AMZN), Facebook’s parent company Meta Platforms Inc. (META), or Google’s parent company Alphabet Inc. (GOOG, GOOGL). yeah. These are now technically considered consumer discretionary rights or communications. service company.
SPDR S&P Semiconductor ETF (XSD)
This $1.5 billion fund from State Street Global Advisors aims to serve semiconductor companies of all sizes by owning members of the semiconductor subindex of the S&P Total Market Index. There is. The expense ratio is 0.35%, and the fund’s 44 holdings are roughly evenly weighted. State Street describes XSD as a modified equal weight fund, so the $1.2 trillion Nvidia and $3 billion SiTime Corp. (SITM) each represent about 3% of the fund.
This has worked very well, with a five-year return of 177.6%, meaning that despite the drop in August, the fund is up about 26% this year.
“Semiconductor ETFs like XSD are driven by two macro developments: the passage of the 2022 CHIPS Act to fund semiconductor research, development and manufacturing in the United States, and the rapidly growing interest in artificial intelligence. “We have benefited from this,” Ural said.
iShares US Technology ETF (IYW)
BlackRock’s $11 billion fund, which tracks the Russell 1000 Technology RIC 22.5/45 Capped Index (USD), is up 49% this year and continues to generate nearly 133.8% returns over five years despite a decline in 2022 ing. Tied to a broad market-cap weighted index, more than one-third of the portfolio is made up of Apple and Microsoft alone, with two-thirds of that made up of Tesla Inc. (TSLA) and Oracle Corp. (ORCL). , among the top 10 stocks, including Nvidia. .
Although the expense ratio is relatively modest at 0.39%, its concentration makes this fund riskier than other funds.
Fidelity MSCI Information Technology Index ETF (FTEC)
The fund has a wide range of activities with exceptionally low fees of just 0.084% of assets. The fund is a market-capitalization weighted fund, meaning it focuses on large companies. Apple and Microsoft account for 43% of the portfolio, and the top 10 companies account for about 61%. 109% increase in 5 years.
The $7.5 billion fund owns more than 300 stocks and is as well-diversified as the index it tracks. It hasn’t caught up with semiconductor funds in 2023, but it’s not designed to catch up.
“Unlike the Technology Select Sector SPDR (XLK), which is limited to the IT sector of the large-cap S&P 500, FTEC also holds mid- and small-cap stocks,” Ural said. “It may be appropriate for investors who believe market breadth will improve after the first half of 2023, when the largest mega-cap stocks accounted for most of the market returns.”
iShares Enhanced Technology Software Sector ETF (IGV)
This $6.6 billion BlackRock fund focuses on specialized software and has performed well, posting a 79% return over the past five years. Although not exposed to a potential correction in semiconductor stocks, Bettafi warns that the market-cap weighted fund, which tracks the S&P North American Technology and Software Index, may not be well-diversified. It’s all U.S.-based companies, its stocks are all in companies that are adapting to the industry’s shift to cloud computing, and, perhaps worst of all, individual investors are already using it as part of index funds. They may own major stocks in their own company. The expense ratio is 0.41%.
“Many investors are turning to more diversified tech ETFs that offer exposure to multiple sectors, rather than the software industry, which has faced headwinds due to cloud computing and rampant piracy. It might be better to do it,” says VettaFi.
To the casual observer, the $203 billion QQQ is the benchmark tech fund. That’s in part thanks to a marketing campaign of more than $100 million a year, and while not a technology index per se, the index it tracks often ranks among the “tech-rich Nasdaq-100.” .
While not as pure a technology business as VGT, much less a chip fund, QQQ is enabled by technology innovation, even if Amazon, Metaplatform, and Alphabet are classified as such by federal regulators. Owns a wide range of companies. High tech company. This is emblematic of how rapidly technology is permeating our lives, so quickly that Amazon, which makes most of its profits from selling cloud computing services to businesses, suddenly becomes a technology company. Instead, it was classified as a consumer company.
QQQ’s portfolio is a market-cap weighted Nasdaq 100 index, and 61% of the fund’s holdings are officially classified as technology. That doesn’t include companies like Tesla, Amazon, Internet access company Comcast Corp. (CMCSA), or tech companies like eBay Inc. (EBAY) and Netflix Inc. (NFLX). Nearly 20% of the portfolio is comprised of technology-based companies that are no longer classified as technology businesses. The rest is made up of familiar names like Costco Wholesale Corporation (COST), PepsiCo Inc. (PEP), and Starbucks Corporation (SBUX), as well as more than half a dozen pharmaceutical and biotech stocks.
Even after the tech-driven catastrophe of 2022, QQQ has more than doubled investors’ money in the past five years. According to the fund’s prospectus, the expense ratio is 0.2% of assets, of which 40% is spent on marketing. There are reasons why QQQ is the largest “technology” ETF, although some funds perform better and many are more purely technology focused.
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