Growth investors shouldn’t let these three tech ETFs fall by the wayside.
Investing in the stock market can be hard. After all, there are tens of thousands of investment options to choose from. So, where’s the best place to start?
In my opinion, exchange-traded funds (ETFs) offer something for everyone. They’re a great place for new investors to start. Meanwhile, a seasoned investor can often find an ETF that helps them round out their portfolio or boost their returns.
So, let’s have a look at three technology ETFs that I think are worth consideration for growth-oriented investors.
Image source: Getty Images.
Technology Select Sector SPDR Fund
First up is the Technology Select Sector SPDR Fund (XLK 2.79%). This ETF is one of the largest tech-sector ETFs in the world, with over $65 billion in net assets. What’s more, with a track record dating back to the 1990s, this is one of the oldest tech ETFs around.
Top holdings include Microsoft, Apple, Nvidia, Broadcom, and Advanced Micro Devices. However, potential investors need to note how top-heavy those holdings are; Microsoft and Apple alone account for 42% of the fund’s overall holdings.
| Company Name | Symbol | Percentage of Assets |
|---|---|---|
| Microsoft | MSFT | 22.9% |
| Apple | AAPL | 19.3% |
| Broadcom | AVGO | 4.5% |
| Nvidia | NVDA | 4.5% |
| Advanced Micro Devices | AMD | 3.1% |
| Salesforce | CRM | 3.1% |
| Adobe | ADBE | 2.4% |
| Accenture | ACN | 2.3% |
| Cisco Systems | CSCO | 2.1% |
| Oracle | ORCL | 2.1% |
Turning to performance, the fund has generated an amazing 20.3% compound annual growth rate (CAGR) over the last decade, easily outpacing the S&P 500‘s 12.5% CAGR over the same period.
Moreover, the fund’s expense ratio of 0.09% is great. It’s one of the lowest expense ratios available for a sector-focused ETF, and it means investors will pay only $9 per year for every $10,000 invested in the fund.
VanEck Semiconductor ETF
Next up is the VanEck Semiconductor ETF (SMH 2.69%). As the name implies, this fund focuses on all facets of the semiconductor sector, including chip designers, manufacturers, and foundries.
With semiconductors now appearing in more places than ever — your smartphone, your car, perhaps even your refrigerator — it’s been a great time to own semiconductor stocks. As a result, the VanEck Semiconductor ETF boasts an incredible 27.2% CAGR dating back to 2014.
Top holdings in the fund include Nvidia, Intel, and Broadcom.
| Company Name | Symbol | Percentage of Assets |
|---|---|---|
| Nvidia | NVDA | 20.6% |
| Taiwan Semiconductor Manufacturing Company | TSM | 11.9% |
| Broadcom | AVGO | 7.7% |
| ASML Holding | ASML | 4.9% |
| Texas Instruments | TXN | 4.6% |
| QUALCOMM | QCOM | 4.6% |
| Intel | INTC | 4.5% |
| Lam Research | LRCX | 4.5% |
| Micron | MU | 4.4% |
| Applied Materials | AMAT | 4.4% |
What’s more, the rapid growth of artificial intelligence (AI) applications — and the need for the fast, powerful semiconductors behind them — means the future looks bright for chipmakers.
Turning to costs, investors in the fund are assessed an expense ratio of 0.35%. While that’s not terrible, it’s also not the lowest fee around for tech-sector ETFs. In other words, you do pay up for quality when it comes to this ETF.
Invesco QQQ Trust
Last is the Invesco QQQ Trust (QQQ 2.01%). Now, strictly speaking, this fund is not a pure tech ETF; its holdings include stocks like Costco, PepsiCo, and Marriott International.
However, over 50% of its holdings are tech companies, which means it qualifies as a tech-sector ETF in my book. Moreover, this fund, also known as “the QQQs,” is one of my favorite ETFs. Here’s why:
The reason why it’s not over-diversified is that the fund tracks the Nasdaq 100 index. That index comprises non-financial stocks listed on the Nasdaq exchange, weighted by market cap, with some modifications. In other words, it’s similar to the S&P 500 index but a little smaller, with a higher concentration of tech stocks and no financial stocks.
Top holdings include many of the Magnificent Seven, among others:
| Company Name | Symbol | Percentage of Assets |
|---|---|---|
| Microsoft | MSFT | 8.8% |
| Apple | AAPL | 7.6% |
| Nvidia | NVDA | 5.8% |
| Alphabet | GOOG/GOOGL | 5.4% |
| Amazon | AMZN | 5.3% |
| Meta Platforms | META | 5% |
| Broadcom | AVGO | 4.4% |
| Tesla | TSLA | 2.4% |
| Costco | COST | 2.3% |
| Advanced Micro Devices | AMD | 1.8% |
In terms of performance, the fund has delivered an 18.4% CAGR over the last ten years, which far outpaces the returns of the S&P 500, Dow Jones Industrial Average, and Russell 2000.
QQQ Total Return Level data by YCharts.
Last, its expense ratio is reasonable: 0.20% — meaning investors pay $20 per year for every $10,000 invested.
To sum up, each of these tech-oriented ETFs offers something unique, but they are all worth considering for growth-seeking investors.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jake Lerch has positions in Adobe, Alphabet, Amazon, Invesco QQQ Trust, Nvidia, and Tesla. The Motley Fool has positions in and recommends ASML, Accenture Plc, Adobe, Advanced Micro Devices, Alphabet, Amazon, Apple, Applied Materials, Cisco Systems, Costco Wholesale, Lam Research, Meta Platforms, Microsoft, Nvidia, Oracle, Qualcomm, Salesforce, Taiwan Semiconductor Manufacturing, Tesla, and Texas Instruments. The Motley Fool recommends Broadcom, Intel, and Marriott International and recommends the following options: long January 2025 $290 calls on Accenture Plc, long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short January 2025 $310 calls on Accenture Plc, short January 2026 $405 calls on Microsoft, and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
