When It Comes to Technology ETFs, Diversifying Outperforms Long-Term

When it comes to technology exchange traded funds (ETFs), is it better to target a specific segment of the sector or broaden your horizons?

Gary Gordon for ETF Expert believes that two-year returns indicate that the results are better with the broader funds. To make his point, he says that the iShares Dow Jones Technology Fund (IYW) was out-hustled by only one of the sub-sector ETFs, which was the iShares Goldman Sachs Software Fund (IGV).

The three-year annualized returns for IYW are 7.8%; for IGV, they’re 8.6%. The three-year numbers for the Technology Select Sector SPDR (XLK) are up 7.7%.

The other funds saw greater volatility:

• First Trust Dow Jones Internet (FDN), down 5.5% in the last year*
• Goldman Sachs Networking (IGN), three-year annualized returns up 4%
• State Street Semiconductors (XSD), down 10.7% in the last year*
• PowerShares Lux Nanotech (PXN), down 18.2% in the last year*

Easy and instant diversification is one of the most attractive features of ETFs. If you decide you’d rather tackle a sub-sector, just have your stop loss in place and be prepared to hit the eject button if and when the time comes to do so.

*Three-year annualized returns not available