One of the ongoing themes in getting technology exposure is to hone in on disruption. This strategy is warranted given its growth potential, but can be tricky to navigate given the plethora of options.
As mentioned, the excitement surrounding disruptive themes is warranted, and certain technological advancements are no longer speculative, but a reality.
“Tech companies are using disruptive technologies like artificial intelligence to analyze large, complex datasets,” a Morningstar article explained. “Research and development in the healthcare industry has created lifesaving drug therapies and treatments. And climate change is forcing energy and utilities companies to focus on renewable energy.”
The next questions is where to get access to the ever-growing potential of disruption? An easy answer is the ALPS Disruptive Technologies ETF (DTEC).
Per its basic fund description, DTEC seeks investment results that correspond generally to the performance of its underlying index, which is the Indxx Disruptive Technologies Index (IDTEC). Overall, DTEC delivers exposure to companies using disruptive technologies, such as those that are entering traditional markets with new digital forms of production and distribution, seek to disrupt an existing market and value network, displace established market-leading firms, products and alliances and increasingly gain market share.
Broad Exposure and Deep Diversification
A peek under the hood DTEC shows the fund isn’t a run-of-the-mill tech fund that’s top heavy in big tech names like Apple, Amazon, and Microsoft. The fund allocates its capital to 100 holdings without over-concentration in a certain stock — for example, the largest holding (as of July 28) is Allegro MicroSystems Inc, which has a 1.26% allocation.
Furthermore, the fund spreads its capital across a diversified set of disruptive sectors within the tech space, including cloud computing, fintech, and internet of things. This means the fund is able to capture upside if a certain sector experiences strength, such as artificial intelligence during the past business quarter.
“The ALPS Disruptive Technologies ETF (DTEC) gained 5.48% in the second quarter of 2023 as global technology stocks rallied on depressed valuations and artificial intelligence (AI) advancement,” a Q2 performance report from ALPS noted.
Overall, DTEC does the heavy lifting for investors who want diversified disruptive tech to add a tinge of growth to their portfolios. Rather than hand-pick select stocks poised for disruption, DTEC presents a simple, all-encompassing option.
“Because disruptive technology is such a broad, wide-reaching concept, it is difficult to identify companies that fall within the group,” said Dave Sekera, Morningstar’s chief U.S. market strategist.
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