Ten years after the dot com bubble burst, it appears that the technology sector and the exchange traded funds (ETFs) that track it are making a comeback. But can you really buy it?
Technology is appealing for several reasons. On one hand, many of the technology behemoths are sitting on hoards of cash, have strong cash flows and are, overall, in decent financial shape. On the other hand, companies and consumers are expected to spend more upgrading and purchasing new computer systems and networking gadgets, reports Jonathan Burton for MarketWatch.
According to Standard & Poor’s, despite the economic downfall of 2008, technology is the only sector, other than utilities, that boasts an increase in the number of dividend-paying companies since 2007. Additionally, several analysts are indicating that the sector has great growth potential and low volatility, enabling it to have a high projected long-term earnings growth.
When investing in the sector, one must keep in mind that it is famous for drawing hot money, moving quickly and fueling the mergers and acquisitions departments of many investment banks. Using ETFs to play the technology sector can be a great way to get exposure – it’s easier to grab a basket of stocks than trying to pick the winners in such a large sector.
Some of the many funds available include:
- Technology Select SPDR (XLK): up 19.4% year-to-date and above its 200-day moving average
