Telecom and Tech ETFs Work As a Team

October 11th at 12:00pm by Tom Lydon

If you’ve been viewing telecommunications and technology exchange traded funds (ETFs) as separate investments, it might be time to consider how they can work together.

Telecom is a dividend play, making it appealing for investors looking for an alternative to the bond stampede. Technology, in contrast, offers relatively rapid earnings growth and a chance to ride a wave of merger-and-acquisition activity, reports Jonathon Burton for MarketWatch. [Semiconductors Hit the Refresh Button.]

Together, says Burton, telecom and tech give investors a “barbell” approach to the market: growth on one side, dividends on the other. While tech offers cash-rich companies and more stability, telecom yields better.

There are nearly two dozen technology ETFs in the ETF Analyzer, including these long-only and leveraged plays:

  • PowerShares QQQ (NYSEArca: QQQQ)
  • SPDR Technology Select Sector ETF (NYSEArca: XLK)
  • iShares Dow Jones U.S. Technology Sector Index ETF(NYSEArca: IYW)
  • Direxion Daily Technology Bull 3x Shares (NYSEArca: TYH)

As a sign of the increasing amount of crossover seen between the two industries, a long-rumored Verizon/Apple deal may be coming to fruition. Miguel Helft for The New York Times reports that after more than three years of using only AT&T cellphone networks, Apple is now making a version of the iPhone 4 for Verizon’s network, according to a person who is in direct contact with Apple. [Are International Telecom ETFs A Better Bet?]

There are a number of telecom ETFs to choose from, too; look under the hood by visiting the ETF Resume to see which ones might give the best exposure to both industries:

  • PowerShares Dynamic Telecom (NYSEAca: PTE)
  • Vanguard Telecom (NYSEArca: VOX)
  • iShares Dow Jones U.S. Telecommunications Index Fund (NYSEArca: IYZ)

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.