In the era of evolving technologies and the expanding prevalence in every aspect, tech equities ETFs are an ideal investment alternative for investors seeking high growth and robust returns. These ETFs cover a broad range of companies engaged in software development, communication services, electronics, cybersecurity, and data management, allowing diversification.
Against this backdrop, investors could consider solid Technology Equities ETFs Fidelity MSCI Information Technology Index ETF (FTEC), Vanguard Information Technology Index Fund ETF Shares (VGT), and iShares Expanded Tech-Software Sector ETF (IGV) to buy as innovation accelerates.
The information technology market is expected to grow strongly at a noteworthy CAGR of 8.3%, resulting in a market value of $12.42 trillion by 2028. In the forecast period, trends like globalized IT services, digital transformation, climate tech solutions, cybersecurity innovation, AI, innovative city development, and evolving e-commerce will prevail.
In a recent release, Gartner predicted that over 75% of enterprises will prioritize backup of SaaS applications as an essential by the year 2028. According to the forecast, worldwide end-user SaaS spending will grow 20% to reach $247.2 billion in the current year and reach around $300 billion in 2025.
Besides, in the recent past, technological innovation has reached new heights. In 2023 and 2024, the quantum of the prompts processed by large language models (LLMs) surged from 100,000 to two million tokens, and this has resulted in surged investments and innovation to advance more powerful and efficient computing systems.
Amid this, bagging quality tech equities ETFs could provide exposure to a significant potential segment, positioning investors for solid returns. These ETFs offer diversification by investing in companies engaged in the technology sector. Also, with the industry’s growth prospects, these ETFs bear high growth potential.
Given these encouraging trends, let’s look at the fundamentals of the top three Technology Equities ETFs, beginning with number 3.
ETF #3: Fidelity MSCI Information Technology Index ETF (FTEC)
FTEC tracks a market-cap-weighted index of US information technology sector stocks. The ETF offers exposure to US technology firms across all market caps, which correspond to the price and yield of an equity index called the MSCI USA IMI Information Technology 25/50 Index.
The fund has assets under management (AUM) of $11.23 billion. FTEC’s top holdings include Apple Inc. (AAPL) with a 16.44% weighting, followed by Microsoft Corporation (MSFT) at 14.32%, and NVIDIA Corporation (NVDA) and Broadcom Inc. (AVGO) at 13.14% and 4.41%, respectively.
The ETF has a total of 297 holdings, with its top 10 assets comprising 58.03% of its AUM. FTEC’s expense ratio is 0.08%, lower than the category average of 0.58%. Over the past six months, its fund inflows were $1.53 billion, and $2.08 billion over the past year.
FTEC pays an annual dividend of $1.12, which translates to a 0.67% yield at the current price level. Moreover, the fund’s dividend payouts have increased at a CAGR of 12.7% over the past three years. Notably, FTEC has paid dividends for 10 consecutive years.
FTEC has surged 8.2% over the past six months and 28.6% over the past year to close the last trading session at $166.96. It has a beta of 1.16. The fund’s NAV was $166.94 as of September 11, 2024.
FTEC’s POWR Ratings reflect solid prospects. The fund has an overall rating of B, translating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
FTEC has a B grade for Buy & Hold. Within the Technology Equities ETFs group, it is ranked #31 of the 119 ETFs.
To access all FTEC POWR Ratings, click here.
ETF #2: Vanguard Information Technology Index Fund ETF Shares (VGT)
VGT is managed by The Vanguard Group, Inc. It seeks to invest in the U.S. public equity markets, primarily in companies engaged in the information technology sector. It includes growth and value stocks across diverse market capitalizations.
The ETF tracks the MSCI US IMI 25/50 Information Technology Index. With $72.13 billion in AUM, VGT’s top holdings are AAPL with a 17.22% weighting, MSFT at 15.84%, and NVDA and AVGO at 14.07% and 4.75%, respectively.
The fund has a total of 320 holdings, with its top 10 assets comprising 61.07% of its AUM. It has an expense ratio of 0.10%, lower than the category average of 0.58%. VGT fund inflows were $3.69 billion over the past six months and $5.74 billion over the past year.
VGT’s annual dividend of $3.70 equates to a 0.66% yield at the current price level. Moreover, the fund’s dividend payouts have increased at a CAGR of 12.3% over the past three years. VGT has paid dividends for 18 consecutive years.
VGT has gained 8.2% over the past six months and 28.1% over the past year to close the last trading session at $561.58. It has a beta of 1.16. The fund’s NAV was $561.64 as of September 11, 2024.
VGT’s sound fundamentals are reflected in its POWR Ratings. The fund has an overall rating of B, which translates to a Buy in our proprietary rating system.
The fund has a B grade for Buy & Hold. Of the 119 ETFs in the Technology Equities ETFs group, VGT is ranked #30.
Click here to see other VGT ratings for Trade and Peer.
ETF #1: iShares Expanded Tech-Software Sector ETF (IGV)
IGV is an ETF that seeks to track the investment results of an index comprising North American equities in the software industry. It invests primarily in medium cap companies, offer access to lesser-known, potentially high growth firms. IGV tracks the performance of the S&P North American Technology-Software Index.
The fund has an AUM of $6.28 billion. Its top holdings include Adobe Inc. (ADBE) with a 10.19% weighting, followed by Salesforce, Inc. (CRM) at an 8.84% weighting, and Oracle Corporation (ORCL) and MSFT at 8.39% and 7.61%, respectively. IGV has a total of 115 holdings, with the top 10 assets comprising 60.16% of its AUM.
The fund has an expense ratio of 0.41%, compared to the category average of 0.58%. Over the past three months, IGV fund inflows came in at $306.95 million. Also, it has a beta of 1.06.
IGV has gained 6.1% over the past month and 18.2% over the past year to close the last trading session at $86.67. The fund has a NAV of $86.73 as of September 11, 2024.
IGV’s POWR Ratings reflect its strong outlook. The ETF has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
IGV has an A grade for Buy & Hold, Trade, and Peer. The fund is ranked #2 among the 119 ETFs within the same group.
To access all the POWR Ratings for IGV, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
VGT shares were trading at $566.07 per share on Thursday afternoon, up $4.49 (+0.80%). Year-to-date, VGT has gained 17.39%, versus a 18.30% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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