The Omni Intelligencer

Sell your house faster for more. auction-style-property-sale
  Monday, June 27, 2016  Home > Money > Finance > Investment > How to Ride the Technology Sector with ETFs
Follow us on Twitter
Every Dollar Helps
Donate using PayPal
Amount:

How to Ride the Technology Sector with ETFs

| More

Today's stock market is starting to remind me of 1999. Back then, you may recall, the technology sector led the whole market higher. The same thing is happening so far in 2012.

Admittedly, the party didn't end so well back then — and it won't last forever this time, either. Yet I've learned over the years that uptrends can last far longer than most people think.

Now, thanks to ETFs, you have new ways to get quick, broad exposure to the technology sector. Today I'll review some candidates for you.

Technology, Broadly Speaking

Just a few months ago I told you about some new, specialized technology ETFs. Today we will look at the broad-based tech ETFs that try to capture the entire sector.

SPDR Technology Select Sector (XLK) is the largest and oldest technology ETF. It also has the lowest expense ratio at only 0.18 percent.

SPDR knows about technology.
SPDR knows about technology.

The 81 stocks in the XLK portfolio represent the technology and telecommunications components of the S&P 500 Index. That means XLK gives you a bunch of familiar names with high liquidity. It also means XLK doesn't give you any mid-cap or small-cap technology exposure. And the inclusion of telecom stocks means it is not a "pure play" tech ETF.

iShares Dow Jones U.S. Technology Sector Index Fund (IYW) is another big tech ETF. In most ways it is similar to XLK, but there are two big differences ...

First, IYW has a sharply higher expense ratio of 0.47 percent. That might be all right if the fund offered something distinctive, but it really doesn't.

Second, IYW is highly concentrated. Almost 70 percent of the portfolio is in the ten largest holdings. About 20 percent is in Apple (AAPL) alone. IYW is simply tracking an index from Dow Jones, of course, but I like to see more diversification.

Diversification is important in sector ETFs.
Diversification is important in sector ETFs.

Rounding out the top tech ETFs is Vanguard Information Technology ETF (VGT). Like XLK and IYW, this one is also tilted toward large-cap technology names but also has about 25 percent of its assets in mid-cap and small-cap stocks. VGT is pure technology — no telecom — and the expense ratio is only 0.19 percent.

With 413 holdings in its portfolio, VGT is probably the broadest U.S. technology ETF. Even so, more than half of the assets are in the ten largest stocks.

All things considered, I think VGT is currently the best tech ETF. The 25 percent in small- and mid-cap tech stocks is important because they often represent the sector's best growth potential.

XLK, IYW, and VGT are by far the largest technology sector ETFs, but they aren't the only choices. Here are three smaller funds with similar objectives to the "big three."

  • iShares S&P North American Technology Sector Index Fund (IGM)

  • First Trust Technology AlphaDEX Fund (FXL)

  • SPDR Morgan Stanley Technology ETF (MTK)

What about the 
Rest of the World?

The technology ETFs we've looked at so far are all based on U.S. sector indexes. This means they don't give you any exposure to technology stocks from other countries.

In some sectors this would be no big deal, but some important technology players come from Asia and Europe. Even the best U.S. technology ETFs leave out well-known companies like Samsung, SAP, Hitachi, and Toshiba.

Fortunately there is a way to get the global tech sector in one ETF.iShares S&P Global Technology Sector Index Fund (IXN) is still predominantly a U.S. fund (about 77 percent) but also has significant involvement in Japan, South Korea, Taiwan, Germany, and elsewhere.

Technology is a global industry.
Technology is a global industry.

You should always be careful when trading international and global ETFs. Liquidity can be a real problem, which is one of the reasons I track them so closely for my International ETF Trader members. I'm glad to see IXN is improving on this score. The bid-ask spreads and trading volume are generally good.

Will technology ETFs keep going higher as 2012 unfolds? The best I can say right now is that the group has very bullish momentum. No uptrend lasts forever, though.

I'm especially concerned about the degree to which Apple's amazing performance is pushing the whole sector up. We saw a similar pattern in the last tech mania, back then it was Cisco (CSCO).

With ETFs, you don't have to pin all your hopes on one stock. You have more choices than ever. If you're bullish on technology, you can put them to good use.


Sell your house faster for more. auction-style-property-sale
| More
 

Current Headlines - Finance

  • Anbang plans to convert most of Waldorf Astoria to apartments: WSJ 27 Jun 2016 | 12:02 am

    The Waldorf Astoria is pictured at 301 Park Avenue in New YorkChina's Anbang Insurance Group Co [ANBANG.UL] plans to convert as much as three-quarters of the rooms at New York's landmark Waldorf Astoria hotel into apartments, the Wall Street Journal reported on Sunday, citing people familiar with the matter. The insurer, which bought the hotel from Hilton Worldwide Holdings Inc in 2014 for $1.95 billion, plans to close the Waldorf for up to three years starting next spring, the report said.


  • A year after 1MDB: Malaysian premier takes hardline turn 26 Jun 2016 | 10:36 pm

    A half-dozen countries have launched 1MDB-related probes, but few believe big fish will be caught, citing the carefully constructed complexity of 1MDB fund flowsOne year after a financial scandal that would have toppled many leaders, Najib is standing taller than ever after smothering investigations, outmanoeuvering opponents, and bolstering his control with a pair of recent election wins. Last July 2, the Wall Street Journal reported that Najib received a mysterious $681 million payment, which capped months of allegations that billions were diverted from 1MDB (1Malaysia Development Berhad), an investment fund Najib founded. Other revelations followed, including reports that Najib's film-producer stepson used 1MDB-related funds to bankroll the Hollywood greedfest "The Wolf of Wall Street", and for millions in luxury purchases.


  • Post-Brexit global equity loss of over $2 trillion worst ever - S&P 26 Jun 2016 | 10:09 pm

    A trader works on the floor of the New York Stock Exchange (NYSE) in New YorkBy Edward Krudy NEW YORK (Reuters) - The $2.08 trillion wiped off global equity markets on Friday after Britain voted to leave the European Union was the biggest daily loss ever, trumping the Lehman Brothers bankruptcy during the 2008 financial crisis and the Black Monday stock market crash of 1987, according to Standard & Poor's Dow Jones Indices. Global markets skidded following the unexpected result from the June 23 referendum, in which Britons voted to withdraw from the EU by a 52 percent to 48 percent margin. The route started in Asia, with the Nikkei down 7.9 percent, and carried over into Wall Street as the S&P 500 fell 3.6 percent.


  • Wall Street futures lower on Brexit concerns 26 Jun 2016 | 6:39 pm

    A trader works on the floor of the New York Stock Exchange (NYSE) in New YorkU.S. stock index futures eased slightly in early trading on Sunday after Britain's vote to leave the European Union sparked a sharp sell-off in global markets on Friday, wiping out over $2 trillion from world equities. Investors were blindsided by Thursday's vote, having bid up equity markets in the days leading up to it. U.S. stock indexes had been in striking distance of all-time highs, with some expecting a sharp rally to new highs in the coming days.


  • Wall Street eyes low rates, earnings after Brexit rout 26 Jun 2016 | 5:33 pm

    A trader works on the floor of the New York Stock Exchange (NYSE) in New YorkWith markets reeling after Britain's vote to leave the European Union, some on Wall Street expect cooler heads to prevail over the next several sessions as investors focus domestically on the outlook for the U.S. economy and company earnings. Globally, the $2.08 trillion in stock market value wiped out in the sell-off marked the largest daily loss ever in dollar terms, according to Standard & Poor's Dow Jones Indices. S&P 500, Dow Jones and Nasdaq index futures were each down about 0.5 percent shortly after 6:15 p.m. New York time (22:15 GMT).


  • Obama uses Hiroshima visit as opportunity to urge no nukes 27 May 2016 | 2:00 pm

    Obama uses Hiroshima visit as opportunity to urge no nukesHIROSHIMA, Japan (AP) — With an unflinching look back at a painful history, President Barack Obama stood on the hallowed ground of Hiroshima on Friday and declared it a fitting place to summon people everywhere to embrace the vision of a world without nuclear weapons.


  • Senate sleuths focus on ex-State Department aide in Clinton email ‘cover-up’ 27 May 2016 | 1:32 pm

    Senate sleuths focus on ex-State Department aide in Clinton email ‘cover-up’As Hillary Clinton seeks to rebound from a highly critical report from the State Department’s inspector general, Senate investigators and a conservative group are zeroing in on newly revealed evidence about the activities of a now retired State Department computer specialist in orchestrating what they charge was a “cover-up” of the former secretary of state’s email practices. The role of John Bentel, whose identity as a key figure in the email probes was first reported by Yahoo News on Wednesday, is expected to be one focus of questioning today when Clinton’s former chief of staff, Cheryl Mills, is deposed in a lawsuit brought by Judicial Watch over the State Department’s handling of Freedom of Information Act requests relating to Clinton’s emails, according to a source close to the case.


  • G7 told to act on antibiotics as dreaded superbug hits U.S. 27 May 2016 | 10:39 am

    Colonies of E. coli bacteria are seen in a microscopic image courtesy of the CDCBy Kylie MacLellan and Ben Hirschler ISE-SHIMA, Japan/LONDON (Reuters) - Britain told the G7 industrial powers on Friday to do more to fight killer superbugs as the United States reported the first case in the country of a patient with bacteria resistant to a last-resort antibiotic. U.S. scientists said the infection in a 49-year-old Pennsylvania woman "heralds the emergence of truly pan-drug resistant bacteria" because it could not be controlled even by colistin, an antibiotic reserved for "nightmare" bugs. In Japan, British Prime Minister David Cameron said leading countries needed to tackle resistance by reducing the use of antibiotics and rewarding drug companies for developing new medicines.


  • Statue of Liberty, other world sites threatened by climate change, says U.N. 27 May 2016 | 10:29 am

    Statue of Liberty, other world sites threatened by climate change, says U.N.The Statue of Liberty is seen in New York harbor. Climate change might dampen Lady Liberty’s glow, according to experts. The United Nations released a report Thursday saying 31 natural and cultural World Heritage sites in 29 countries are vulnerable to the effects of climate change: rising temperatures, rising sea levels, intensifying storms, longer droughts and so on.


  • 19 people rescued from Kentucky cave 31 Dec 1969 | 6:00 pm


The fastest and best way to sell real estate.
auction-style-property-sale