Top Tech ETFs Of 2016

August 05, 2016

Technology stocks are dominating the market. Earlier this week, Facebook clawed its way past oil giant Exxon Mobil to briefly become the fourth-largest U.S. company by market cap. Meanwhile, Amazon―a company some consider tech and others consumer discretionary―also momentarily eclipsed Exxon.

With Apple, Google and Microsoft firmly holding on to the top three spots, that means for a short period of time five of the United States' largest companies were in the technology sector. According to the Wall Street Journal, that's an unprecedented feat.

The tech sector now has a weighting of 20.7% in the S&P 500, well ahead of financials and health care, which represent just north of 15% of the index. This is the largest share of the market that tech has accounted for since the bursting of the dot-com bubble in the year 2000 (at that time, the sector peaked at a weighting of more than 35% of the S&P 500).

S&P 500 Sector Weightings

 

Incidentally, Amazon isn't considered a tech company within the S&P 500, but rather a consumer discretionary company. But some other indexes do consider the internet retailer to be a part of the tech industry.

Likewise, some technology ETFs don't hold the firm, while others do. Indeed, tech is an area where there's a lot of differentiation among the various exchange-traded products. Here we take a look at some of the best-performing ETFs in the sector this year and the differences between them.

Broad Tech ETFs

According to the ETF.com technology channel, there are currently 59 tech ETFs on the market, with $37.3 billion in total assets. That includes the largest of the bunch, the $12.3 billion Technology Select Sector SPDR Fund (XLK | A-92), which is up 9.3% year-to-date.

XLK offers broad, large-cap exposure to the sector by holding all the tech stocks in the S&P 500. XLK also blends the telecom sector within its portfolio, so there's a notable weighting in stocks like AT&T and Verizon within the fund.

XLK is the only traditional, large-cap tech ETF to make the top 10 performers list. The PowerShares S&P SmallCap Information Technology ETF (PSCT | A-40) and the First Trust Nasdaq-100 Technology Sector Index Fund (QTEC | B-68) also made the list and offer broad exposure, but are a bit different.

Up 12.4% on the year, PSCT targets the small-cap tech space by pulling its holdings from the S&P SmallCap 600. On the other hand, QTEC, which is up 9.7% on the year, tracks an equal-weighted index of the 100 largest tech stocks listed on the Nasdaq exchange.

YTD Returns For XLK, PSCT, QTEC

 

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