When it comes to the best-performing exchange-traded funds of 2023, the theme they all share is obvious: a focus on technology.
While the S&P 500 has had a pretty good year, with roughly 18% returns through Nov. 30, the tech-heavy Nasdaq has performed about twice as well in 2023. The best-performing ETFs have done even better.
To be clear, this is not an absolute or complete list. There are “leveraged” funds that use complex financial instruments to deliver two or three times the returns of a benchmark. These obviously do much better than the standard flavors if they are right — or much worse when they are wrong.
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Furthermore, there are a host of small, boutique ETFs out there without a lot of assets that managed to outperform. A key example is a fund like the VanEck Digital Transformation ETF (ticker: DAPP), which has delivered an amazing 157% since the start of the year. Unfortunately, it has less than $60 million in assets even after this run, so it’s safe to say it’s not a particularly established or popular option.
The following list includes any non-leveraged ETFs that command more than $500 million in total assets as of this writing. The list may not be 100% inclusive, but it is indeed representative of the major funds — and major trends — in ETFs across 2023. Returns include dividends, where applicable.
Invesco NASDAQ Internet ETF (PNQI)
2023 return through Nov. 30: +52.9% Assets under management: $626 million Expense ratio: 0.60%, or $60 annually on every $10,000 invested
As the name implies, PNQI is primarily a play on internet businesses. The fund is driven by top holdings, including Facebook parent Meta Platforms Inc. (META), Google parent Alphabet Inc. (GOOGL) and ride-sharing platform Uber Technologies Inc. (UBER). About 80 tech stocks make up this list of internet leaders, though a good 25% or so is tied up in META, GOOGL and enterprise tech leader Microsoft Corp. (MSFT).
iShares Expanded Tech-Software Sector ETF (IGV)
2023 return through Nov. 30: +53.2% Assets under management: $7.4 billion Expense ratio: 0.41%
A broad play on tech stocks that offer software services, IGV is composed of nearly 120 different holdings, including Microsoft, creative software icon Adobe Inc. (ADBE) and sales and marketing platform Salesforce Inc. (CRM). With rising interest rates increasing borrowing costs and inflationary pressures pushing up input costs for all manner of businesses, software is one area of the market that has done quite well, thanks to deep-pocketed companies like these that are lean and boast loyal customers.
First Trust NASDAQ-100 Technology Sector Index Fund (QTEC)
2023 return through Nov. 30: +54.1% Assets under management: $3.2 billion Expense ratio: 0.57%
This First Trust offering takes the Nasdaq-100 benchmark of the largest companies listed on that stock exchange, then weeds out every company that is not in the tech sector. Since a lot of big-name Silicon Valley firms are listed on the Nasdaq, it’s a good who’s who of the industry. But more importantly, it’s an “equal-weight” fund that regularly rebalances to make sure the big dogs like Microsoft aren’t overrepresented in the portfolio, and smaller stocks — like cloud security firm CrowdStrike Holdings Inc. (CRWD) — get an equal place in the lineup of about 40 companies.
iShares U.S. Technology ETF (IYW)
2023 return through Nov. 30: +57.8% Assets under management: $13.3 billion Expense ratio: 0.40%
The largest tech ETF on this list by assets, IYW is a pretty vanilla approach to the sector. It has about 130 holdings, but has a huge bias toward trillion-dollar leaders Apple Inc. (AAPL) and Microsoft, which command about 35% of the entire portfolio. Still, you can’t argue with results, as this simple but effective approach has delivered big time in 2023 as large-cap tech stocks have been one of the few consistent winners across the year.
VanEck Semiconductor ETF (SMH)
2023 return through Nov. 30: +58.2% Assets under management: $10.8 billion Expense ratio: 0.35%
The “cheapest” ETF on this list as measured by annual expenses, SMH is also very liquid and popular with investors. It’s not terribly complicated, holding about 25 of the biggest microchip design and manufacturing companies on the planet. Top holdings at present include chipmaker Nvidia Corp. (NVDA), Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) and Broadcom Inc. (AVGO). Considering the ubiquitous use of semiconductors in everything from cars to computers to high-end coffee makers, this sector has been an area of continued interest from investors across the last year.
Amplify Transformational Data Sharing ETF (BLOK)
2023 return through Nov. 30: +59.1% Assets under management: $510.8 million Expense ratio: 0.75%
There’s lots of hype around blockchain technology, but also a lot of misunderstanding as it is lumped in with cryptocurrencies, which are just one way to apply this innovative technology. BLOK is an ETF that looks to play the broader trend of blockchain, so while it does include crypto-native companies like Coinbase Global Inc. (COIN), it also includes stakes in companies like traditional financial exchange operator CME Group Inc. (CME) that offers crypto futures.
SPDR NYSE Technology ETF (XNTK)
2023 return through Nov. 30: +60% Assets under management: $601 million Expense ratio: 0.35%
The Nasdaq stock exchange has a reputation for leading when it comes to tech, but a few big winners on the New York Stock Exchange make this exchange-specific ETF one of this year’s top performers, despite only focusing on the other major trading venue in New York. You may not have ever noticed, but the largest NYSE-listed tech stocks are Meta Platforms, Nvidia and Uber. All three of these stocks have had a heck of a year, and so has XNTK as a result.
ARK Fintech Innovation ETF (ARKF)
2023 return through Nov. 30: +64.8% Assets under management: $975.1 million Expense ratio: 0.75%
Keeping with the theme of financial innovation but broadening to other areas of fintech beyond just blockchain, ARKF is a way to invest in about 30 of the most dynamic players in this area of Wall Street. Once again, crypto shows up but so do mobile payments leader Block Inc. (SQ) and e-commerce specialist Shopify Inc. (SHOP). If you’re interested in buying a stake in the transaction platforms of the future, ARKF is the place to look.
ARK Next Generation Internet ETF (ARKW)
2023 return through Nov. 30: +72.8% Assets under management: $1.5 billion Expense ratio: 0.88%
Mashing up several of the themes we’ve covered so far, this innovative fund from ARK covers several digital next-gen companies. That includes Bitcoin plays like Coinbase, streaming video leader Roku Inc. (ROKU), Block and roughly 30 others. It is a curated list of potential disruptors, and at least in 2023, these companies have lived up to Wall Street’s high expectations as a group as they have driven big returns for this ETF.
ProShares Bitcoin Strategy ETF (BITO)
2023 return through Nov. 30: +97.1% Assets under management: $1.5 billion Expense ratio: 0.95%
The best-performing ETF of them all in 2013, better even than some micro funds without big backing or even leveraged funds that seek to double returns, is this Bitcoin-focused offering. With Bitcoin up more than 130% on the year, it should be no surprise that this Bitcoin-linked fund has also seen big success. Top components among the other tech ETFs on this list are crypto-related, but BITO is more directly linked to Bitcoin prices via holding Bitcoin futures. To be clear, it is not invested in Bitcoin itself. But these derivatives more closely track Bitcoin returns than for-profit companies with other business lines, overhead, or less direct exposure to Bitcoin.
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10 Best-Performing ETFs of 2023 originally appeared on usnews.com
Update 12/01/23: This story was previously published at an earlier date and has been updated with new information.
