It seems like everyone wants to invest in tech – it has the biggest growth in the market and likely will for years to come. Tech is changing and advancing so rapidly that there is no shortage of places to invest your money. But is there a tech index to follow? And what are the top performing tech funds? How do you even get in, or know where to start? Keep reading for our opinion of the top tech funds to invest in right now.
But…before we dive in, we need to be sure we understand the basics (because when you don’t, that’s when you’re prone to lose money!!).
First off, is there a tech index out there? And if so, what are your top options?
There are a couple ways to track the technology sector.
First, the NASDAQ is sometimes looked at as a type of tech index since it’s weighted so heavily in the technology sector. And the NASDAQ 100 list is concentrated in the tech sector, and often looked at to determine the health of the tech sector.
There is also the Dow Jones U.S. Technology Index (ticker symbol DJUSTC), which measures the “stock performance of U.S. companies in the technology industry.” This is good for tracking the market when it comes to this sector.
Does Vanguard Have a Technology Index Fund?
What about the best known name in the index fund business? Does Vanguard have a technology index fund?
Vanguard actually has a few options when it comes to funds in the technology sector, and they’re among the top tech index funds.
Vanguard Information Technology Index Funds Admiral Shares (VITAX)
If you’re looking specifically for an index fund, Vanguard Information Technology Index Fund Admiral Shares (VITAX) is a great choice. It typically performs well year over year, and has an expense ratio of 0.10%. The price as of writing is $203.83 per share. The downside is that the initial minimum investment is $100,000.
Vanguard Information Technology ETF (VGT)
If that’s not in your realm of possibility (yet), it is available as an ETF – the Vanguard Information Technology ETF (VGT). It has the same expense ratio of 0.10%, and at the time of writing is $398.09 per share. It is available to purchase for the minimum price of one share (so if you have roughly 400 bucks, you can buy it!).
The 10 largest holdings of VGT, which make up 59.10% of its total net assets, are:
- Cisco Systems
- Accenture plc
Best Tech Index Funds 2022
So, what are the best choices for tech index funds in 2022?
Because of the pandemic, supply chain issues have made it harder for chips to be made and shipped where they need to go. And this has obviously caused a bit of trouble for the companies that rely heavily on chips and chip-related products. So, choosing the best tech index funds in 2022 isn’t all that easy!
And, don’t just blindly follow our advice here. Before you pull the trigger on investing, be sure to do your research and talk to an investment professional as well.
With that said, here are a few of our top choices for the best tech index funds in 2022!
The expense ratio for BLOK is 0.71%, a little on the high side, and an annual dividend yield of 1.09%. This is an actively managed fund that invests heavily in blockchain and cryptocurrency.
Its top holdings are Silvergate Capital Corp, Coinbase Global Inc, and NVIDIA corp.
Invesco Dynamic Semiconductors ETF (PSI)
The expense ratio is a little lower than BLOK, at 0.56%, with an annual dividend yield of 0.13%. As you can tell by the name, this ETF focuses its investments on companies that produce semiconductors.
Its top holdings are Broadcom Inc, Texas Instruments Inc, and Intel Corp.
Technology Select Sector SPDR Fund ETF (XLK)
This ETF tracks the tech companies inside the S&P 500, meaning it’s one of the most popular tech stocks to buy. The expense ratio is nice and low at 0.12% with an annual dividend yield of 0.73%.
Its top holdings are the general tech giants: Apple, Microsoft, and NVIDIA.
Shelton Capital Management NASDAQ-100 Index Direct Shares (NASDX)
This is one of the top performing tech index funds, and has been doing really well over the last 5 years. This fund tracks the performance of the NASDAQ-100 list, which is very heavily technology sector weighted. The expense ratio is 0.5%, and the annual dividend yield is 0.15%.
Its top holdings are Apple, Microsoft, Amazon, and Tesla.
Fidelity ZERO Large Cap Index (FNILX)
While this doesn’t specifically track the tech sector, it does have a lot of the top tech companies, so it’s worth checking out. Especially when you find out the expense ratio is 0%, and the annual dividend yield is 0.97%.
And the same tech giants fill this fund as most of the rest, Microsoft, Apple, Amazon, and Tesla.
Best Tech ETF for Long-Term
I’m liking the tech funds that I mentioned above, but what if we’re looking at investing for the next 5 years, 10 years, or longer? What is the best tech ETF for the long-term?
In my opinion, one of the best tech ETFs for long-term growth is the Invesco QQQ ETF (QQQ).
It covers a wide breadth of the technology sector, from computers to zero-emission vehicles. Its expense ratio is 0.20% and annual dividend yield is 0.48%.
Even though it’s not strictly a tech fund, it is heavily weighted in tech. It follows the NASDAQ-100 list, and like most, top holdings are Apple, Microsoft, Amazon, and Tesla.
But it has potential for the long term because it’s more diversified across the tech sector than even regular tech ETFs are. And, according to Investopedia, it’s the fourth most popular ETF to purchase.
If you’re asking yourself these questions:
- What is the best tech fund?
- Which tech index fund is best?
- What is the best performing tech ETF?
…The battle for the top tech fund seems to sit between two main players that we’ve already mentioned, QQQ and VGT. So is QQQ better than VGT? Or is it the other way around?
As we said before, VGT has an expense ratio of 0.10%, so pretty low. And, it invests heavily into Apple, Microsoft, NVIDIA, Visa, Mastercard, Broadcom, Adobe, Cisco Systems, Accenture, and Salesforce. The average annual growth over the last 10 years is 21.75%.
QQQ has an expense ratio of 0.20%. It invests mainly in Apple, Microsoft, Amazon, and Tesla. Over the last 10 years, the average annual return has been 22.53%.
QQQ has a slightly higher expense ratio, but also earned slightly more per year.
So which is best between QQQ and VGT?
Overall, I say it’s basically a wash! Both are performing great and either option is likely to grow heavily over the next 10 years as well!
Top Tech Index Funds…What is the Best Tech Index Fund?
While there’s no specific tech index to follow, there are some that are weighted so heavily in the technology sector, we can all but consider them one.
ETFs and index funds that track these markets (namely the NASDAQ-100, S&P 500, and the Dow Jones U.S. Technology Index) allow us to see what’s going on in the tech sector fairly easily.
There are several ETFs and Index Funds to choose from, and most hold the same top companies (Apple, Microsoft, etc.). Dialing in to what the fund is all about will help you choose which one to put your money into.
Tech is certainly on its way up right now. If it were me and I’d have to pick one top tech index fund, I’d choose either QQQ or VGT in my portfolio!
What about you? Did you have some top tech index funds in mind? Is there anything else you would add?
AUTHOR Derek Sall
Derek has a Bachelor's degree in Finance and a Master's in Business. As a finance manager in the corporate world, he regularly identified and solved problems at the C-suite level. Today, Derek isn't interested in helping big companies. Instead, he's helping individuals win financially--one email, one article, one person at a time.