The technology sector is off to a strong start in 2024 with the Nasdaq-100 Technology Sector Index up more than 10% year to date. This is hardly a surprise with the rise of artificial intelligence and increasing global dependence on technology.
[Sign up for stock news with our Invested newsletter.]
Technology has been a resilient sector and is likely to always be relevant given our current world, says Jason Werner, founder and accredited investment fiduciary at Werner Financial. “Also, tech companies have been known for their rapid growth structures, making them attractive for investors to add into their portfolios.”
But not all tech companies succeed, and trying to cherry pick winners can be a loser’s game.
For simplicity and the assurance that you won’t miss out on all the fun, exchange-traded funds, or ETFs, allow you to hold many of the biggest names in Big Tech in a single ticker. With the capacity to hold dozens or even hundreds of tech stocks, ETFs can be a smart alternative to stock picking even in the best of times. But you still need to do your research to find the best tech ETF for your portfolio.
While technology is likely to continue growing in our world, not all funds are guaranteed the same success, Werner says. “We encourage investors to do their due diligence and research specific funds, as well as their underlying holdings before moving forward.”
If you’re thinking the tech future is still bright, here are some leading tech ETFs to consider in 2024:
| Tech ETF | Expense Ratio | YTD Performance |
| Invesco QQQ Trust (ticker: QQQ) | 0.20% | 7.0% |
| Vanguard Information Technology ETF (VGT) | 0.10% | 6.4% |
| Invesco S&P 500 Equal Weight Technology ETF (RSPT) | 0.40% | 4.4% |
| First Trust NASDAQ Cybersecurity (CIBR) | 0.59% | 3.4% |
| First Trust Dow Jones Internet ETF (FDN) | 0.52% | 7.2% |
*As of Feb. 22 close.
Invesco QQQ Trust (QQQ)
When looking for tech ETFs, “we always start with probably the most popular selection, which is the Invesco QQQ Trust ETF,” Werner says.
Though not technically a tech ETF, this $249 billion, five-star fund from Invesco is one of the five largest exchange-traded products in the U.S. and an incredibly liquid way to invest in the top technology stocks of 2024. It’s not exclusively a sector fund, as it’s benchmarked to the Nasdaq-100 index, which holds the biggest 100 or so firms on the Nasdaq exchange.
Since that index has always been tech-heavy and excludes traditional U.S. stocks like JPMorgan Chase & Co. (JPM) and Johnson & Johnson (JNJ) that are on the New York Stock Exchange, the result is a fund that’s biased toward tech. Specifically, nearly 58% of its assets are in the tech sector versus 29.5% for the S&P 500.
“QQQ has a strong track record and gives a diverse range of companies within the technology sector,” Werner says.
Vanguard Information Technology ETF (VGT)
Perhaps the largest truly sector-specific technology ETF is VGT, with some $71.9 billion in assets. Just as QQQ has its quirks by including some stocks outside of Big Tech mainstays, VGT goes the other way with a massive prioritization of larger tech stocks.
Due to its market-weighting system, where bigger companies represent more of the portfolio, more than 60% of the fund’s total assets are in the top 10 positions alone — with Microsoft Corp. (MSFT) and Apple Inc. (AAPL) at more than 40% between the two of them.
On the plus side, this leading technology ETF is cheap, charging just 0.10% annually in fees, or $10 on every $10,000 invested. But clearly you’re not getting a lot of sophistication here.
That said, Morningstar’s research team is bullish on this fund, giving it five out of five stars and a gold medal, indicating the researchers have the most conviction that VGT will outperform a relevant index or most peers over a market cycle.
[READ: 7 Best International Stock Funds to Buy]
Invesco S&P 500 Equal Weight Technology ETF (RSPT)
To avoid the dominance of tech sector giants in your fund, you might consider an equal-weighted ETF like RSPT.
An equal-weight approach means the fund gives each holding a roughly equal weight, regardless of the company’s size. Market-cap-weighted indexes, like the S&P 500 and its derivatives, weight companies by size so the largest companies make up a larger portion of the portfolio than smaller companies.
If you look under the hood of RSPT, you’ll see that even the largest holding, Nvidia Corp. (NVDA), gets only 2.16% of the fund’s total assets. The result of this equal-weight approach is a far more diversified portfolio with less than 19% of its total assets in the top 10 holdings.
So if you’re looking for a truly diversified play on the tech sector with a reasonable expense ratio of only 0.4%, RSPT deserves a look.
First Trust NASDAQ Cybersecurity (CIBR)
If you want to narrow your focus to a particular area within the technology industry, cybersecurity is a good choice.
“Cybersecurity has a long-term macro bullish thesis as it becomes more and more important, especially from an enterprise standpoint as we become more and more dependent on technology,” says Daniel Milan, investment advisor representative and managing partner at Cornerstone Financial Services in Southfield, Michigan.
For cybersecurity exposure, he likes CIBR, which invests in companies involved in cybersecurity within the tech and industrials sector. It only holds companies classified as cybersecurity companies by the Consumer Technology Association that have a minimum market capitalization of $500 million and a minimum three-month daily dollar trading volume of $1 million. This criteria results in a portfolio of 32 stocks, most of which are categorized as software companies.
With almost $6.7 billion in assets itself, CIBR is the largest fund in the cybersecurity sector that provides strong liquidity, Milan says.
First Trust Dow Jones Internet Fund (FDN)
New technology startups seem to spring to life every day, but no one can predict which ones will live on. For this reason, it can make sense to focus on larger, more well-established companies within the tech industry. To this end, Milan recommends FDN.
“This fund provides broad exposure to technology companies with a tilt toward large-cap companies,” he says. “This provides broader exposure to the overall internet (and) tech sector than more focused funds and thus is a strong option for long-term investors looking to participate in the continued growth of our reliance on technology.”
FDN’s portfolio includes 41 companies, many of which are big names you’ll likely recognize, such as Amazon.com Inc. (AMZN), Meta Platforms Inc. (META) and Netflix Inc. (NFLX). Companies considered for this selective portfolio are ranked based on their three-month market capitalization and three-month average trading volume.
More from U.S. News
The Complete Berkshire Hathaway Portfolio
5 of the Best Paper Trading Sites
8 Best Income ETFs to Buy in 2024
5 Best Tech ETFs to Buy in 2024 originally appeared on usnews.com
Update 02/23/24: This story was previously published at an earlier date and has been updated with new information.
