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Technology stocks are soaring. The Nasdaq 100 index, which includes the 100 largest stocks on the tech-heavy Nasdaq exchange, is up 55.13% over the past year. The technology sector is up 45.7% in the past year. Chipmaker Nvidia is up 230% in the past 12 months alone. Despite these impressive results, picking technology stocks remains a risky endeavor. While stocks like Apple, Amazon, and Alphabet have continued to rise over time, tech investors looking for the next big thing could still face losses.
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That’s where technology ETFs come in. Exchange-traded funds act like mutual funds because they hold a basket of securities, but they trade like stocks on an exchange and their price adjusts throughout the day. Most ETFs are also passively managed, mirroring an index and providing returns roughly equivalent to that index. Technology ETFs are a great way to invest in technology and reduce risk.
The 12 Best Technology ETFs
Here are some tech ETFs to watch in 2024.
Invesco QQQ Trust (QQQ)
VanEck Semiconductor ETF (SMH)
SPDR NYSE Technology ETF (XNTK)
iShares US Technology ETF (IYW)
First Trust Nasdaq 100 Technology Sector Index Fund (QTEC)
iShares Semiconductor ETF (SOXX)
Invesco PHLX Semiconductor ETF (SOXQ)
Technology Select Sector SPDR Fund (XLK)
First Trust Dow Jones Internet Index Fund (FDN)
Invesco S&P 500 Equal Weight Technology ETF (RSPT)
Vanguard Information Technology ETF (VGT)
SPDR S&P Software & Services ETF (XSW)
1. Invesco QQQ Trust (QQQ)
Invesco QQQ Trust is one of the original tech ETFs, founded in 1999. It has had a solid performance throughout its history, but really took off around 2022. QQQ is up 65.22% over the past 12 months, closing at $434.51 on February 15, very close to its 52-week high of $439.14. This fund tracks the Nasdaq 100 Index.
Top holdings include Microsoft, Apple, Amazon.com, Nvidia and Broadcom.
2. VanEck Semiconductor ETF (SMH)
This semiconductor ETF has risen 60.17% over the past year. The VanEck Semiconductor ETF is heavily invested in Nvidia (22.91%) but also holds Taiwan Semiconductor Manufacturing Co. Ltd. ADR (9.36%), Advanced Micro Devices Inc. (6.12%) and ASML Holding NV ADR (5.21%).
3. SPDR NYSE Technology ETF (XNTK)
The SPDR NYSE Technology ETF invests in 35 large technology companies listed on the New York Stock Exchange. Some of its top holdings include Advanced Micro Devices Inc., Nvidia Corp., Broadcom Inc., ASML Holding NV ADR, Netflix Inc. and Lam Research Corp.
Over the past 12 months, the SPDR NYSE Technology ETF has risen 51.97%.
4. iShares US Technology ETF (IYW)
iShares US Technology ETF invests at least 80% of its assets in components of the technology sector and investments with substantially identical economic characteristics to the technology sector. Key holdings include Microsoft Corp., Apple Inc., Nvidia Corp., Alphabet Inc. Class A, Alphabet Inc. Class C and Meta Platforms Inc. Class A. iShares US Technology ETF has gained 51.25% over the past 12 months.
5. First Trust Nasdaq 100 Technology Sector Index Fund (QTEC)
First Trust Nasdaq 100 Technology Sector Index Fund invests in the securities that make up the technology stocks in the Nasdaq 100 Index in the same weighted percentage as the index. No single stock represents more than 3% of the fund. Top holdings include Nvidia Corp. (2.97%), Advanced Micro Devices Inc. (2.84%), Meta Platforms Class A (2.75%), ASML Holding NV ADR (2.73%) and Marvell Technology Inc. (2.68%).
The overall Nasdaq has performed extremely well over the past year, driven by tech stocks, and this top-performing ETF has returned 48.18% over the past 12 months.
6. iShares Semiconductor ETF (SOXX)
The iShares Semiconductor ETF, which focuses on the recently strong semiconductor sector, has risen 45.74% over the past year. Its top holdings include Advanced Micro Devices, Nvidia Corp., Broadcom Inc., Qualcomm Inc. and Intel Corp.
7. Invesco PHLX Semiconductor ETF (SOXQ)
The Invesco PHLX Semiconductor ETF invests in securities that make up a modified market-capitalization weighted index of the 30 largest semiconductor companies in the U.S. Some of the largest holdings include Advanced Micro Devices Inc. (9.65%), Nvidia Corp. (9.18%) and Broadcom Inc. (8.91%).
Over the past 12 months, SOXQ has risen 45.57%.
8. Technology Select Sector SPDR Fund (XLK)
The Technology Select Sector SPDR Fund invests in stocks that make up the technology sector in roughly the same proportions as the sector itself. Its top holdings include Microsoft Corp. (22.97%), Apple Inc. (20.37%), Nvidia Corp. (5.48%), Broadcom Inc. (5.29%) and Adobe Inc. (2.97%).
The Technology Select Sector SPDR Fund is up 42.55% over the past year.
9. First Trust Dow Jones Internet Index Fund (FDN)
First Trust Dow Jones Internet Index Fund invests in the largest and most actively traded companies in the internet industry: tech companies you might already know, such as Amazon.com Inc., Meta Platforms Inc., Netflix Inc., Salesforce Inc., Alphabet Inc. Class A and Class C, and Cisco Systems Inc.
Some of these internet stocks are quite mature, which is why the ETF has seen a somewhat more modest growth of 37.55% over the 12-month period.
10. Invesco S&P 500 Equal Weight Technology ETF (RSPT)
The Invesco S&P 500 Equal Weight Technology ETF invests at least 90% of its assets in securities that make up the S&P 500 Information Technology Index. Top holdings include Advanced Micro Devices, NVIDIA, Juniper Networks, Broadcom, Fortinet, and Western Digital.
Over the past 12 months, the Invesco S&P 500 Equal Weight Technology ETF has performed 23.46%.
11. Vanguard Information Technology ETF (VGT)
The Vanguard Information Technology ETF tracks the performance of the MSCI US IMI Information Technology 25/50 Index, which includes companies of all sizes in the information technology sector, and has gained 21.83% over the past year.
Major holdings include Microsoft and Apple, each accounting for more than 20% of the fund’s investments, while other major holdings include Nvidia, Adobe and Salesforce.
12. SPDR S&P Software & Services ETF (XSW)
The SPDR S&P Software & Services ETF tracks the S&P Software & Services Select Industry Index, which is the software and services segment of the S&P Total Market Index. The fund currently has less than 1% of its holdings invested in a single company. Top holdings include Atlassian Corp. Class A, Fortinet Inc., Adeia Inc., Zeta Global Holdings Corp. Class A and DocuSign Inc.
Over the past 12 months, the SPDR S&P Software & Services ETF has risen 21.29%.
How to Add Technology ETFs to Your Portfolio
ETFs are bought and sold like stocks, and unlike mutual funds, whose prices are determined at the end of the day, ETFs’ prices are determined continuously throughout the trading day.
Most ETFs, including the ones mentioned above, are passively managed, which means they track an index – in this case a broad technology index or a more specific index such as semiconductors or internet companies. This means that the ETF’s performance will be roughly the same as the index – it won’t beat the index, but it won’t lose significantly more than the index either.
In comparison, most mutual funds are actively managed, which means they have higher costs and may require minimum purchases.
You can add ETFs to your portfolio the same way you add stocks. Most ETFs can be purchased in any brokerage account (after doing your research, of course). You can place a market order to buy the ETF immediately at the current trading price, or you can place a limit order to specify the maximum price you are willing to pay and have your order executed only when the ETF reaches that price or lower.
ETFs are a good way to invest in a specific sector without having to choose which stocks in that sector are likely to make big gains. This is especially true for sectors like technology, which can be volatile but the winners can make really big gains.
FAQ
What are the best technology ETFs?
Technology ETFs have performed very well recently, but it’s unclear whether this will continue. Some of the best performers over the past year include Invesco QQQ Trust (QQQ), VanEck Semiconductor ETF (SMH), and SPDR NYSE Technology ETF (XNTK).
What are your top three ETFs?
In terms of assets under management, the top three are SPDR S&P 500 ETF Trust (SPY), iShares Core S&P 500 ETF (IVV), and Vanguard S&P 500 ETF (VOO).
Is QQQ a good tech ETF to invest in?
The Invesco QQQ ETF is one of the best-performing ETFs in the technology sector over the longest period of time, and it also has the longest track record. While there is no guarantee that it will continue to perform at the same pace in the future, the QQQ and other ETFs tracking the Nasdaq-100 have performed very well over the long term.
Data current as of February 16, 2024 and subject to change.
Editor’s note: This content is not provided by any of the entities mentioned in this article. Any opinions, analyses, reviews, ratings, or recommendations expressed in this article are solely those of the authors and have not been reviewed, approved, or endorsed by any of the entities mentioned in this article.
This article originally appeared on GOBankingRates.com: 12 Best Tech ETFs for 2024
