Technology sector exchange-traded funds (ETFs) buy and sell the shares of manufacturers and service providers of electronics and information technologies that comprise the technology sector. Technological solutions in this sector range from consumer goods to enterprise software. The shares of these companies typically trade at high earnings multiples compared to other sectors and have been known to drive market cycles frequently. Companies with significant market capitalization, such as Apple Inc. (AAPL), Microsoft Corp. (MSFT), and Alphabet Inc. (GOOG), as well as small-cap and micro-cap companies, contribute to the sector’s outlook and growth.
- The technology sector underperformed the broader stock market over the past year.
- The technology exchange-traded funds (ETFs) with the best one-year trailing returns are IGN, TDV, and TDIV.
- The top holdings of these funds are Arista Networks Inc., Motorola Solutions Inc., and Microsoft Corp., respectively.
There are 67 technology ETFs that trade in the United States, excluding inverse and leveraged ETFs, as well as funds with less than $50 million in assets under management (AUM). The sector as represented by the S&P 500 Information Technology Sector Index underperformed the broader market. The benchmark sector index posted a -16.7% one-year trailing return as compared with the S&P 500’s total return of -12.5% as of Sept. 7, 2022.
The best technology ETF, based on performance in the past year, is the iShares North American Tech-Multimedia Networking ETF (IGN). We will look at the top three technology ETFs below. All numbers reported are as of Sept. 6 2022. In order to focus on the funds' investment strategy, the top holdings listed for each ETF exclude cash holdings and holdings purchased with securities lending proceeds except under unusual cases, such as when the cash portion is exceptionally large.
- Performance Over One-Year: -7.1%
- Expense Ratio: 0.40%
- Annual Dividend Yield: 0.30%
- Three-Month Average Daily Volume: 9,077
- Assets Under Management: $113.6 million
- Inception Date: July 10, 2001
- Issuer: BlackRock Financial Management
IGN targets the S&P North American Technology-Multimedia Networking Index, an index of North American companies in the multimedia and networking technology sectors. The fund invests in telecom equipment, data networking, and wireless equipment companies. The fund is highly concentrated, with the top 10 holdings accounting for over two-thirds of invested assets.
The top holdings of IGN include Arista Networks Inc. (ANET), a networking company serving customers including data centers and cloud computing companies; Motorola Solutions Inc. (MSI), a video and telecommunications equipment, software, and services provider; and Cisco Systems Inc. (CSCO), a networking hardware, software, and telecommunications products company.
- Performance Over One-Year: -10.4%
- Expense Ratio: 0.45%
- Annual Dividend Yield: 1.11%
- Three-Month Average Daily Volume: 8,928
- Assets Under Management: $109.7 million
- Inception Date: Nov. 5, 2019
- Issuer: ProShares
TDV is a large-cap growth fund that tracks the S&P Technology Dividend Aristocrats Index. The index focuses on established, tech-focused companies that have consistently raised their dividends for at least seven years. This includes companies involved in information technology, interactive home entertainment, and interactive media. Data processing and outsourced services companies make up the largest portion of the portfolio at 22.4%, followed by semiconductors companies and electronic components companies.
The top holdings of TDV include Motorola Solutions; National Instruments Corp. (NATI), a maker of automated test equipment and software; and Broadridge Financial Solutions Inc. (BR), a financial technology company.
- Performance Over One-Year: -15.8%
- Expense Ratio: 0.50%
- Annual Dividend Yield: 1.78%
- Three-Month Average Daily Volume: 127,525
- Assets Under Management: $1.6 billion
- Inception Date: Aug. 13, 2012
- Issuer: First Trust
TDIV targets the Nasdaq Technology Dividend Index, an index of technology or telecommunications listed on the NASDAQ, NYSE, or NYSE Amex. Companies must have market capitalizations of at least $500 million and meet minimum three-month average daily dollar trading volume, yield, and dividend requirements. Semiconductors and semiconductor equipment stocks account for 38.4% of the portfolio, followed by software and IT services stocks.
The top holdings of TDIV include Microsoft, a provider of software, hardware and cloud services; International Business Machines Corp. (IBM), a provider of computer hardware, and IT services, including cloud computing; and Broadcom Inc. (AVGO), a semiconductor products company.
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