Large institutional traders may enjoy the robust liquidity found in XLK, but long-term investors who are less concerned about day-to-date, bid-ask spreads may like the cheaper 0.10% expense ratio found in VGT, compared to XLK’s 0.14% expense ratio. With FXL, investors will not find the significant weights to tech titans such as Apple (NasdaqGS: AAPL) and Microsoft (NasadaqGS: MSFT) as they will find with an ETF like XLK or VGT.
“As is the case with many smart beta strategies, a case can be made that FXL’s periods of outperforming cap-weighted rivals are attributable to the size factor. FXL’s holdings have a median market value of $10.5 billion, indicating that this is, essentially, a mid-cap fund. That figure is dwarfed by the weighted average market value of $298.4 billion found on the 75 holdings in the largest technology ETF,” adds Investopedia.
For more information on the tech sector, visit our technology category.
Tom Lydon’s clients own shares of Apple.