Technology is a hugely popular investment trend. That’s hardly surprising – it’s everywhere (you’re reading this very article using technology).
So, here we take a look at 5 ETFs leveraged to the technology trend.
The technology landscape
Technology companies generally either supply software or hardware, or services related to them. Hardware is physical, things like your computer, phone or other device. Software is code installed on the hardware to run programs or apps.
Technology companies operate in a broad range of new and existing sectors. The technology industry is vast, encompassing everything from device manufacture to augmented reality. Things that weren’t previously within the technology space are becoming so as the internet of things becomes a reality.
By one estimate, “the digital economy is worth $11.5 trillion globally, equivalent to 15.5 percent of global GDP, and has grown two and a half times faster than global GDP over the last 15 years.”
Technological advancement seems to occur at an exponential rate thanks to Moore’s law, which states that computers and the information technologies that use them double their capabilities every 12–18 months.
Cybersecurity is becoming an increasing concern as more data is available in more places. Large organisations are gathering increasing amounts of personal information about their customers in order to gain consumer insights. At the same time, initiatives like Open Banking are attempting to give customers some control over how their data is used.
Increased regulation around data security and usage necessitates increased resourcing of data protection and management. As the source of data, businesses become prime targets for cyber-attacks. The global cybersecurity market is forecast to grow to US$248 billion by 2023.
Technology and ETFs
Exchange traded funds (ETFs) providing sector specific access to technology shares are available to trade on the ASX. ETFs are traded just like ordinary shares. ETFs, however, provide exposure to a basket of underlying securities.
Holding multiple securities means ETFs come with a measure of inbuilt diversification. Diversification lowers unsystematic risk, reducing the volatility of portfolio returns.
Sector specific ETFs, such as technology ETFs hold a range of shares within the technology sector. They are diversified within the sector, but not outside the sector.
Here are 5 ETFs designed specifically for technology investors.
The Betashares NASDAQ 100 ETF (ASX: NDQ) provides exposure to the 100 largest non-financial securities listed on the NASDAQ stock market, by market capitalisation.
The ETF tracks the performance of the NASDAQ-100 Index, before fees and expenses. The fund returned 19.90% in the year to 31 October. Management costs are 0.48% per annum and distributions are made twice yearly.
Top holdings include Apple (12.1%), Microsoft (11.6%), Amazon.com (9.0%), Alphabet (8.6%) Facebook (4.9%), Intel (2.9%), Comcast (2.2%), and Cisco Systems.
ETFS Morningstar Global Technology ETF (ASX: TECH) offers focused exposure to the global technology sector. The ETF tracks the Morningstar Developed Markets Technology Moat Focused Index which is composed of equally weighted market leaders that have a competitive advantage over others in the same field.
Returns were 26.45% in the year to 31 October. Management fees are 0.45% per annum and distributions are made twice yearly. Holdings are distributed across the United States (89.6%), Australia (5.8%), Japan (2.4%), and Germany (2.2%).
Top holdings include Arrow Electronics (4.17%), Alphabet Class A (4.13%), Palo Alto Networks (4.12%), Guidewire Software (4.10%), Microsoft (4.06%), Microchip Technology (3.98%), Broadcom (3.94%), Sabre Corp (3.93%), Facebook Class A (3.88%), and Salesforce.com (3.83%).
The Betashares Global Cybersecurity ETF (ASX: HACK) provides exposure to leading companies in the cybersecurity sector. The ETF tracks the Nasdaq Consumer Technology Association Cybersecurity Index.
Returns were 17.79% in the year to 31 October. Management fees are 0.67% and distributions are made twice yearly. Holdings are distributed across the United States (82.5%), Israel (6.0%), Britain (5.6%), Japan (3.0%), France (2.5%), South Korea (0.3%), and elsewhere (0.1%).
Top holdings include Broadcom (6.2%), Palo Alto Networks (6.2%), VMWare (6.1%), Okta Inc (5.7%), Cisco Systems (5.4%), Fortinet Inc (3.7%), Splunk (3.7%), Fireeye Inc (3.5%), and F5 Networks (3.2%).
The Betashares Asia Technology Tigers ETF (ASX: ASIA) provides exposure to 50 of the most innovative and disruptive technology companies in Asia. This can be used to complement existing US based technology allocations. The ETF tracks the Solactive Asia Ex-Japan Technology & Internet Tigers Index.
Returns in the year to 31 October were 21.07%. Management costs are 0.67% per annum and distributions are made annually. Holdings were distributed across China (45.7%), Taiwan (23.5%), South Korea (20.9%), India (8.0%), Thailand (1.0%), and elsewhere (0.9%).
Top holdings included Alibaba (11%), Taiwan Semiconductor Manufacturing (9.9%), Tencent Holdings (9.5%), Samsung Electronics (9.5%), Meituan Dianping (7.0%), Infosys (4.9%), Netease Inc (4.6%), SK Hynix Inc (4.5%) and JD.com (4.3%).
Robotics and AI
The ETF Securities Global Robotics and Automation ETF (ASX: ROBO) tracks the ROBO Global Robotics and Automation Index. The Index is made up of shares in companies in the global value chain of robotics, automation, and artificial intelligence.
Returns were 23.74% in the year to 31 October. Management fees are 0.69% per annum and distributions are made annually. Holdings are distributed across the United States (44.2%), Japan (22.4%), Germany (9.1%), Taiwan (5.7%), Switzerland (3.4%), United Kingdom (3.3%), China (2.3%), Sweden (2.1%), France (2.0%), South Korea (1.7%) and elsewhere.
Top holdings include Brooks Automation (1.84%), Zebra Technologies (1.75%), Krones AG (1.71%), Nvidia Corp (1.68%), Koh Young Technology (1.67%), Fanuc Corp (1.66%), Intuitive Surgical (1.63%), Congnex Corp (1.63%) and Daifuku Co Ltd (1.62%).
These ETFs provide instant access to a variety of global technology firms. Whether you are looking to increase you technology exposure or just diversify your portfolio, these ETFs will help you ride the tech train.
The post 5 ETFs for technology investors appeared first on Motley Fool Australia.
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Motley Fool contributor Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS and BetaShares Asia Technology Tigers ETF. The Motley Fool Australia owns shares of BETA CYBER ETF UNITS. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2019