When diving into the technology sector, investors are bombarded with thousands of stocks to choose from. Nevertheless, with exchange traded funds, anyone can take a broad, diversified approach to this growth sector.
There are a number of tech ETFs available, so investors should take the time to differentiate between the funds, writes John Jacobs, executive vice president of the NASDAQ OMX Group, for Forbes.
Due to the transparent nature of ETFs, investors are able to make an informed decision before investing in any tech fund.
“When allocating to a technology-focused ETF, key considerations should include (1) index selection (2) fund size and (3) strategy,” Jacobs said.
For starters, the Technology Select Sector SPDR (NYSEArca: XLK), one of the oldest and largest tech-related ETFs, tracks a cap-weighted index and provides exposure to technology names from the S&P 500 index. Consequently, nearly a quarter of the fund’s total weight is in Apple (NasdaqGS: AAPL) and Google (NasdaqGS: GOOG). [Of Google and ETFs]
However, tech companies listings are not limited to the S&P 500, so XLK leaves out small- and mid-cap names.