ETFs
3 Tech Stock ETFs for Aggressive Investors
Investing in technology stock ETFs can be a strategic way to gain exposure to the technology sector without selecting individual stocks. They typically own a wide range of companies operating in the fields of information technology, software, communications equipment, data storage, electronics, cybersecurity and telecommunications.
Given the context, let’s take a look at the best-performing technology stock ETFs: First Trust NASDAQ Technology Dividend Index Fund (IVDD), ETF Vanguard Communication Services Index Fund (VOX), and the VanEck Semiconductor ETF (SMH) with high return potential and instant diversification.
According to Gartner’s latest forecast, global IT spending is expected to total $5.06 trillion in 2024, reflecting an increase of 8% of the previous year. Additionally, this growth puts global IT spending on track to surpass $8 trillion before the end of the decade. Spending on data center systems is expected to increase in part due to companies considering generative AI.
THE information technology market is expected to reach $12.42 trillion by 2028, with a CAGR of 8.3%, driven by factors such as globalized IT services, digital transformation, cybersecurity innovations, development of smart cities and the evolution of electronic commerce. Furthermore, trends such as cloud computing, machine learning, IoT, and AI will contribute to the market expansion.
Additionally, the global artificial intelligence market is expected to reach $1.81 trillion by 2030, a growth of CAGR of 36.6% during the forecast period (2024-2030).
Technology stock ETFs offer broad diversification and invest in companies offering cutting-edge solutions, innovative tools and more. These ETFs are known for their high growth potential, as the technology sector has historically experienced rapid growth due to continued innovation and increasing demand for technology products and services.
Additionally, technology ETFs typically have lower expense ratios than actively managed mutual funds, making them profitable. However, it is essential to note that the technology sector can be subject to high volatility.
Given these encouraging trends, let’s take a look at the fundamentals of the top three Tech Stock ETFsstarting with number 3.
ETF #3: NASDAQ First Trust Technology Dividend Index Fund (IVDD)
TDIV tracks a modified dividend-weighted index of U.S.-listed technology companies that pay regular dividends. The ETF seeks investment results corresponding to the price and yield of a stock index called the NASDAQ Technology Dividend Index. It holds a portfolio of securities classified as a technology or telecommunications company and must have a minimum market capitalization of $500 million.
The fund has assets under management (Assets under management) of $2.49 billion. TDIV’s top holdings include Apple Inc. (AAPL) with a weighting of 8.14%, followed by Broadcom Inc. (AVGO) at 7.75%, and Microsoft Corporation (MSFT) and Texas Instruments Incorporated (TXN) at 7.61% and 7.44%, respectively.
The ETF has a total of 87 holdings, with its top 10 holdings accounting for 55.59% of its assets under management. TDIV’s expense ratio is 0.50%, lower than the category average of 0.58%. Over the past month, its cash inflow was $7.23 million, and over the past year it was $77.35 million.
TDIV pays an annual dividend of $1.13, which translates to a yield of 1.53% at the current price level. Additionally, the fund’s dividend distributions have grown at a CAGR of 4.8% over the past three years. Notably, TDIV has paid dividends for 11 consecutive years.
TDIV has surged 20.6% over the past six months and 32.8% over the past year to close the latest trading session at $73.52. It has a beta version of 1.0. The net asset value of the fund was $73.53 as of June 5, 2024.
IVDD POWR Ratings reflect strong prospects. The fund has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
TDIV has an A rating for Trading and Buy & Hold. It also has a B rating for Peer. In category A Tech Stock ETFs group, it is ranked #13 out of 119 ETFs.
To access all of TDIV’s POWR Ratings, Click here.
ETF #2: Vanguard Communication Services Index Fund ETF Shares (VOX)
VOX is managed by The Vanguard Group, Inc. The fund invests in companies that provide communications services, including traditional telecommunications, media and Internet services. It seeks to track the performance of a benchmark index that measures the return on investment of communications services stocks.
The ETF tracks the MSCI US IMI 25/50 Communication Services Index. With $4.14 billion in assets under management, VOX’s top holdings are Meta Platforms Inc. Class A (META) with a weighting of 20.02%, Alphabet Inc. Class A (GOOGLE) at 14.14%, and Alphabet Inc. Class C (GOOG) and Verizon Communications Inc. (VZ) at 11.30% and 4.52% respectively.
The fund has a total of 119 holdings, with its top 10 holdings accounting for 70.67% of its assets under management. Its expense ratio is 0.10%, lower than the category average of 0.37%. VOX fund inflows stood at $49.52 million over the past six months and $325.70 million over the past year.
VOX pays an annual dividend of $1.24, which translates to a yield of 0.90% at the current price level. Additionally, the fund’s dividend distributions have grown at a CAGR of 11.2% over the past three years. VOX has paid dividends for 17 consecutive years.
VOX has gained 23.3% over the past six months and 32.2% over the past year to close the latest trading session at $136.69. It has a beta version of 1.04. The net asset value of the fund was $136.61 as of June 5, 2024.
VOX’s strong fundamentals are reflected in its POWR Ratings. The fund has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The fund has an A rating for Trade, Peer, and Buy and Hold. Among the 119 ETFs in the Technology Stock ETF group, VOX is ranked #9.
Click here to see all VOX ratings.
ETF #1: VanEck Semiconductor ETF (SMH)
SMH is a highly concentrated fund that invests in common stocks and depositary receipts of semiconductor companies listed in the United States. It also includes mid-sized companies and listed foreign companies. The fund tracks the MVIS US Listed Semiconductor 25 Index.
SMH has assets under management of $20.56 billion. Its main holdings include NVIDIA Corporation (NVDA) with a weighting of 24.17%, followed by Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM) up to 12.48%, and AVGO and QUALCOMM Incorporated (QCOM) at 7.09% and 5.14%, respectively. SMH has a total of 26 holdings, with the top 10 holdings accounting for 74.65% of its assets under management.
The fund has an expense ratio of 0.35%, compared to the category average of 0.58%. Over the past six months, SMH fund inflows stood at $3.80 billion and $4.05 billion over the past year. Additionally, it has a beta version of 1.35.
SMH pays an annual dividend of $1.04, which translates to a yield of 0.41% at the current price level. The fund’s dividend distributions have grown at a CAGR of 11.5% over the past three years. Furthermore, SMH has paid dividends for 11 consecutive years.
SMH has gained 60.2% over the past six months and 76.3% over the past year to close the latest trading session at $254.41. The fund has a net asset value of $254.48 as of June 5, 2024.
SMH’s POWR Ratings reflect its strong outlook. The ETF has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
SMH has an A rating for Buy & Hold, Trade and Peer. The fund is ranked #3 among 119 ETFs in the same group.
To access all POWR ratings for SMH, Click here.
What to do next?
43-year investing veteran Steve Reitmeister has just released his 2024 market outlook along with his trading plan and top 11 picks for the year ahead.
Stock market outlook for 2024 >
SMH shares rose $1.42 (+0.56%) in premarket trading Thursday. Year to date, the SMH has gained 46.22%, compared to a 12.83% rise in the benchmark S&P 500 during the same period.
About the author: Rjkumari Saxena
Rajkumari began her career as a writer, but gradually moved into financial journalism, leveraging her business background. Fascinated by the interplay of business and economic changes in equities, she aspires to grow as an analyst. With a knack for simplifying complex financial concepts, his mission is to provide investors with information that leads to profitable decisions. More…