The know-how sector strikes shortly, so in the event you’re trying to make investments right here, it might make sense to purchase a tech exchange-traded fund (ETF). A tech ETF is a straightforward solution to construct a tech portfolio, letting you play the sector in the event you suppose it’s going to run increased – and you are able to do it with out analyzing the person corporations. An ETF additionally offers diversification, decreasing your threat in comparison with shopping for just a few particular person shares.
Listed here are among the greatest tech ETFs to think about to your funding portfolio, with information as of April 23, 2025.
What are the principle sorts of tech ETFs?
The tech sector is giant, and for functions of classification, it’s known as “data know-how” as a part of the GICS classification system. That system breaks the tech sector down into three main business teams:
- Software program and providers — This business group contains software program corporations and IT providers corporations.
- Expertise {hardware} and gear — This group contains three important areas: communications gear; know-how {hardware}, storage and peripherals; and digital gear, devices and elements.
- Semiconductors and semiconductor gear — This group contains the “chip” corporations that make semiconductors and those who produce supporting gear.
When you’re searching for broad publicity to tech, you’ll find funds that make investments throughout the sector, providing you with a diversified cross-section of gamers.
Greatest tech ETFs
1. Greatest software program & providers ETF
iShares Expanded Tech-Software program Sector ETF (IGV)
This ETF tracks an index composed of North American software program corporations and interactive media corporations. Prime holdings embrace Oracle, Microsoft and Salesforce.
- 5-year returns (annualized): 14.2 p.c
- Expense ratio: 0.41 p.c
- Dividend yield: n/a
2. Greatest web ETF
First Belief Dow Jones Web ETF (FDN)
This ETF goals to match the funding outcomes of the Dow Jones Web Composite Index, which tracks shares of U.S. web corporations. Its largest holdings embrace Meta Platforms, Amazon and Netflix.
- 5-year returns (annualized): 9.2 p.c
- Expense ratio: 0.51 p.c
- Dividend yield: n/a
3. Greatest semiconductor ETF
iShares Semiconductor ETF (SOXX)
This ETF tracks an index composed of U.S.-listed shares within the semiconductor business. Its high holdings embrace Broadcom, Nvidia and Texas Devices.
- 5-year returns (annualized): 19.1 p.c
- Expense ratio: 0.35 p.c
- Dividend yield: 0.8 p.c
4. Greatest diversified tech ETF
Vanguard Info Expertise ETF (VGT)
This ETF tracks a benchmark index of the knowledge know-how sector, giving buyers a diversified cross-section of the sector. Prime holdings embrace Apple, Nvidia and Microsoft.
- 5-year returns (annualized): 18.6 p.c
- Expense ratio: 0.09 p.c
- Dividend yield: 0.6 p.c
What to search for in an ETF
When investing in ETFs, it’s helpful to have a look at just a few elements of every ETF so that you just really purchase what you suppose you’re shopping for. Listed here are three key issues to search for:
- The sub-sector — Every sub-sector might reply in a different way to developments within the business. For instance, software program corporations will reply in a different way to rising demand than semiconductor corporations, which frequently must take care of the cyclicality of that sub-sector. So you should know what sorts of corporations your ETF owns.
- The funding observe document — The observe document of the ETF can provide you a sign of how the fund may carry out sooner or later, although there are not any ensures. Has the ETF outperformed or underperformed the business? The sub-sector can closely affect the observe document, since not all tech sub-sectors carry out the identical.
- The expense ratio — Take note of the expense ratio, which tells you ways a lot it prices to personal the fund yearly as a p.c of your complete funding in it.
Lastly, it’s price noting that bigger ETFs are inclined to cost decrease expense ratios, as a result of they will unfold the prices of working the fund throughout extra belongings. So the most cost effective funds might typically be the biggest funds, and a low expense ratio is a key measure of what makes a high ETF.
Tips on how to put money into tech ETFs
An ETF could make it simpler for particular person buyers to put money into the tech sector, however due to the assorted business dynamics at play, you’ll nonetheless must know among the sub-sectors you’re investing in. Whereas some sectors do effectively virtually perennially, others could also be extra cyclical and have extra booms and busts, relying on their particular dynamics.
The ETFs above provide you with a extremely liquid solution to put money into the tech sector, however you’ll wish to rigorously contemplate which sectors you’re investing in. If you wish to put money into an upswing of the notoriously cyclical semiconductor business, it’s your decision a fund that’s centered solely on that business group. When you’re proper, you might take pleasure in even higher income than you’ll earn with a extra broadly diversified tech ETF.
Equally, you might wish to put money into some of the worthwhile areas of the market – software program corporations. The large attraction of software program is that these companies can function with monumental margins as they develop their gross sales. As a result of the incremental prices on software program gross sales are low, a lot of each incremental greenback of gross sales might add to pre-tax revenue.
Backside line
Buyers searching for publicity to the tech sector have just a few completely different choices to play it, from funds that put money into sub-sectors to those who make investments throughout the sector. So it’s necessary to know which sector you’re investing in and the potential dangers and returns supplied by every ETF. For that reason, some buyers follow broadly diversified index funds, equivalent to these based mostly on the Commonplace & Poor’s 500 index, and don’t fear an excessive amount of a few sector’s ups and downs.
— Bankrate’s Brian Baker contributed to an replace of this story.
Editorial Disclaimer: All buyers are suggested to conduct their very own impartial analysis into funding methods earlier than investing choice. As well as, buyers are suggested that previous funding product efficiency isn’t any assure of future worth appreciation.
