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Tickers in this Article: AAPL, FEX, IYW, RSP
Originally created for buy-and-hold investors looking for cost-effective ways to diversify their portfolios, ETFs have gained popularity among active traders as well; these financial instrument have proven to be responsive and liquid, serving as viable trading vehicles for those looking to implement any number of shorter-term strategies. With innovation also comes complexity, however, and ETFs are no different, as some of these financial instruments bear greater company-specific risk than others . Consumer electronics giant Apple (AAPL) is no stranger to the headlines; this stock is loved by countless active traders given its tendency to stage massive price swings in either direction. Bullish and bearish speculators alike have demonstrated their infatuation with this industry giant as shares of Apple trade upwards of 21 million times every day. Furthermore, many investors maintain heavy exposure to this stock through their technology ETFs whether they realize it or not .

In fact, of the several dozen ETFs that maintain exposure to Apple, each of the top nine funds feature double-digit allocations to this tech juggernaut. As expected, when Apple's stock is firing on all cylinders Technology ETFs are usually in greenterritory; likewise, when shares of Apple are tanking, a large number of tech funds are likely getting dragged into the red .

Beware of the Apple Effect

Just how much influence does Apple's performance have on some of the more concentrated tech ETFs? Short answer: a significant amount. To get a better understanding of the term company-specific risk, it pays to take a look at Apple's performance relative to the ETF that affords the greatest weight to this stock; in this case, the contender is the iShares Dow Jones U.S. Technology Index Fund , which holds Apple in the number one spot, dedicating just over 23% of its total assets to this stock alone.

Click to Enlarge Consider theperformancechart between IYW and AAPL above; it's fairly evident how this ETF closely tracked the return patterns of shares of Apple leading up to its peak in mid-September. When selling pressures hit Apple, this ETF, notsurprisingly, followed lower,althoughit's certainly worth noting that it held its ground better than the stock thanks to its (somewhat) diversified portfolio .

When it comes to raw performance figures consider the following: since recently peaking at $705.07 a share on September 21, 2012, shares of Apple have shed nearly 16% as of November 26, 2012. By comparison, IYW has lost 9% over this same time period, highlighting the red side of the so-called Apple Effect. On the other hand, Apple can also have a very positive impact on tech ETFs when shares are climbing; even after its recent correction, Apple is still up 45% year-to-date, while IYW is up just over 10%, once again highlighting the sway that this industry giant has on the technology sector, if not the entire market as a whole.

Given the market cap-weightedapproachemployed by most passive, index-based, exchange-traded funds, having exposure to Apple is more or less inevitable thanks to its sheer size. For those looking to tap into the tech sector while steering clear of major allocations to Apple, there are some products worth a closer look. The Rydex S&P Equal Weight ETF allocates roughly 0.20% of total assets to Apple given its equal-weighted strategy while the fundamentally-based First Trust Large Cap Core AlphaDEX Fund dedicates less thanone half of one percent of its portfolio to the well-known behemoth.

Follow me on Twitter@SBojinov

Disclosure: No positions at time of writing.

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