Market indexes give investors the near-perfect look into segments of the market and the entire market itself, enabling investors to better understand overall sector/market performance.
Investing in the corresponding index funds on another hand enable investors to instantly diversify their portfolio while also guaranteeing (based on historical data) long-term positive returns.
The S&P 500 Index which has become a representation of the US stock market, for instance, has continue to grow for decades and only 23.51% of actively managed mutual funds outperform the index over the past five years.
If you had simply invested in funds that passively track the S&P 500, you would have outperformed over 70% of actively managed mutual funds.
For the record, the S&P 500 generated an annualized return of 11.35% over the past five years.
The technology indexes listed below generated an annualized return of more than 20% over the same period (five years). And this number is not far from the number posted by the leading Fund Managers.
As such if you want to invest in index tracking ETFs, go for the Technology Sector. It just common sense.
Here are the top 3 Technology Indexes and their ETFs:
1. Dow Jones U.S. Technology Index
The index, a member of the Dow Jones Global Indices® family, is designed to measure the stock performance of U.S. companies in the technology industry.
The Dow Jones U.S. Technology Index has grown by almost 200% in the last five years, generating an annualized return of 24.28% in the same period. And it’s up 53% this year so far, in spite of the market-wide crash caused by the pandemic.
ETF tracking Dow Jones U.S. Technology Index
iShares U.S. Technology ETF
The investment seeks to track the investment results of the Dow Jones U.S. Technology Capped Index. The fund generally invests at least 90% of its assets in securities of the underlying index and in depositary receipts representing securities of the underlying index. The underlying index measures the performance of U.S. companies in the technology sector. The fund is non-diversified.
2. NASDAQ-100 Technology Sector
The NASDAQ-100 Technology Sector Index is an equal weighted index based on the securities of the NASDAQ-100 Index that are classified as Technology according to the Industry Classification Benchmark (ICB) classification system.
The NASDAQ-100 Technology Sector has grown by almost 195% in the last five years.
ETF tracking NASDAQ-100 Technology Sector
First Trust NASDAQ-100-Technology Sector Index Fund
The investment seeks investment results that correspond generally to the price and yield (before the fund’s fees and expenses) of an equity index called the NASDAQ-100 Technology Sector IndexSM. The fund will normally invest at least 90% of its net assets (including investment borrowings) in the common stocks and depositary receipts that comprise the index. The index is an equal-weighted index composed of the securities comprising the NASDAQ-100 IndexÂ® that are classified as “technology” according to the Industry Classification Benchmark classification system.
3. S&P Technology Select Sector Index
The index is made up of components of the S&P 500 assigned to the Technology Select Sector Index, which seeks to track the technology segment and is a highly liquid benchmark. Stock classifications are based on the Global Industry Classification Standard (GICS). Capping is applied to ensure diversification among companies within the index.
The S&P Technology Select Sector Index has grown by almost 190% in the last five years, generating an annualized return of 23.56% in the same period. And it’s up 50% this year so far, in spite of the market-wide crash caused by the pandemic.
ETF tracking S&P Technology Select Sector Index
Technology Select Sector SPDR Fund
The investment seeks investment results that, before expenses, correspond generally to the price and yield performance of publicly traded equity securities of companies in the Technology Select Sector Index. In seeking to track the performance of the index, the fund employs a replication strategy, which means that the fund typically invests in substantially all of the securities represented in the index in approximately the same proportions as the index. It generally invests substantially all, but at least 95%, of its total assets in the securities comprising the index. The fund is non-diversified.
I’m a Technology Stock Analyst, with focus on companies developing cutting-edge techs. Keeping track of cutting-edge techs, companies and stocks is what I do almost everyday. And I love it. Whether it’s artificial intelligence, 5g, or autonomous vehicles; I’m all in.