This month’s ETF choice is Fidelity’s Information Technology ETF (FTEC). Like it or not, technology and information technology are the future of our world and the global economy. This ETF is a fantastic, low cost way to take advantage of the technology boom in the global stock market.
The fund has over a couple hundred different stock holdings within, though less the 20 are weighted at over 1%. Just under 40% of the fund is comprised of holdings in Apple, Microsoft, Facebook and Google. Overall, this fund provides exposure to a very broad and diverse group of companies within the technology sector.
Tech stocks have dominated the stock market in recent years and tech ETFs are no different. Over the last year, FTEC has returned 37% vs. 22% for the S&P 500. In the last three years, FTEC has averaged a return of nearly 18% per year while the S&P has returned just over 11%. While I can’t guarantee that you’ll continue to see out performance at these levels in the future, I am confident that the tech sector will continue to dominate the market for many years to come.
With return in mind, it is important to note that the technology sector is prone to greater volatility than the broader market. Sometimes the tech sector gets a bit “overheated” and you’ll see a small and short (usually) selloff of tech stocks as some folks “take their gains.” These times, like we’re experiencing right now with the recent selloff of Facebook and the greater tech sector, provides a great buying opportunity for long-term minded investors. If you’re really looking to place your chips in the tech sector, the leveraged ETF TECL will provide you with triple leveraged exposure to tech stocks. Higher highs but more volatility during down periods…TECL is up 125% in the last year and has averaged 55% over the last three years. It is a riskier play because we’re nearly ten years in to this bull market but the returns speak for themselves. I don’t recommend leveraged ETFs for inexperienced investors due to their volatile nature and you should definitely speak to a financial professional before considering leveraged ETFs for your portfolio.
Before purchasing any stocks or ETFs, you should do your own research and consult a financial professional because, disclaimer, I’m not a paid finance professional. You can research FTEC for free on websites like Seeking Alpha and MarketWatch amongst other free online sources. You can look forward to another stock pick in January!