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Top-Ranked Technology ETFs to Buy the Dips in March

Sweta Jaiswal, FRM
·5 min read

The current market condition is looking optimistic considering the introduction of another round of fiscal stimulus and an improving pace of the coronavirus vaccine rollout. In fact, the world will now also receive the first single-shot vaccine in the battle against coronavirus pandemic as the FDA awarded an Emergency Use Authorization (EUA) to the COVID-19 vaccine developed by the Janssen Pharmaceutical Companies of Johnson & Johnson (JNJ).

Against this backdrop, investors are now being observed to shift their undertakings from the high-growth technology sector to those expected to gain from the ongoing optimism and reopening of the U.S. economy. Accordingly, shares of Microsoft MSFT, Apple AAPL and Amazon.com Inc AMZN declined more than 2% on Mar 3. Also, the Nasdaq Composite Index slid 2.7% on the same day. However, the same has been up less than 1% in the year-to-date period.

Moreover, the U.S. 10-year Treasury yield ticked up to 1.47%, putting pressure on high-valuations areas of the market, per a Reuters article. It is a known fact that rising interest rates disproportionately affect high-growth technology players as stated in the above-mentioned article.

Meanwhile, technology has played a major role in the ongoing health crisis. Telemedicine and Digital Health are receiving significant importance. In the present era, data management and storage become an integral aspect of healthcare. Moreover, the pandemic led to an increase in doctors opting for online consultations. Thus, with the growing technological advancements in the healthcare sector and the rising adoption of healthcare IT solutions as well as advantages of cloud usage healthcare, the cloud computing market is on a growth trajectory. The space is forecast to reach a worth of $64.7 billion by 2025 from $28.1 billion in 2020, seeing a CAGR of 18.1%, according to ReportsnReports.

Moving on, cloud computing emerged as a key technology and is keeping up with the growing work-from-home trend in the fight against coronavirus. It is supporting organizations in remotely processing a lot of information, developing and running key applications and services, and helping employees across the world collaborate while working. The work-from-home model bumped up sales of PCs, laptops and other kind of computer peripherals.

Certain ‘new normal’ trends also emerged amid the health crisis like work-from-home and online shopping, increasing digital payments, growing video streaming as well as soaring video game sales. The pandemic is also a boon for the e-commerce industry as people continue staying indoors and shopping online for all essentials, especially food items.

Further, the semiconductor space has been gaining from expanding digitization and growing dependency on the Internet owing to some new normal trends like online shopping, work from home, digital payments, digitization of healthcare, growing favor for video gaming and many more. In fact, growing adoption of cloud computing, and ongoing infusion of AI, machine learning and IoT are expected to keep the sector brewing with opportunities in 2021.

Technology ETFs to Bet on

All the factors discussed above highlight the instrumental role that technology plays amid the ongoing COVID-19 uncertainty in aiding people to maintain safe-distancing norms. Thus, investors could consider the following ETFs:

Vanguard Information Technology ETF VGT

The fund seeks to track the performance of the MSCI US Investable Market Information Technology 25/50 Index. It has an AUM of $42.86 billion. It charges investors 10 basis points (bps) in annual fees. The fund currently sports a Zacks ETF Rank #2 (Buy) with a Medium-risk outlook (read: Expect a Rally in EV ETFs on a Likely Apple-Hyundai Deal).

The Technology Select Sector SPDR Fund XLK

The fund seeks to provide investment results that before expenses correspond generally with the price and yield performance of the Technology Select Sector Index. It has an AUM of $38.61 billion. It charges investors 12 bps in annual fees. The fund presently flaunts a Zacks ETF Rank of 2 with a Medium-risk outlook (read: Tap Apple ETFs as iPhone 12 Powers $100B Revenues in Q1 Earnings).

iShares U.S. Technology ETF IYW

The fund seeks to provide investment results that before expenses correspond generally with the price and yield performance of the Dow Jones U.S. Technology Capped Index. It has an AUM of $7.08 billion. It charges investors 43 bps in annual fees as stated in the prospectus. The fund sports a Zacks ETF Rank #1 (Strong Buy) currently with a Medium-risk outlook (read: Cloud Powers Microsoft's Fiscal Q2 Results: ETFs to Buy).

Fidelity MSCI Information Technology Index ETF FTEC

The fund seeks to provide investment returns that correspond before fees and expenses with the performance of the MSCI USA IMI Information Technology Index, generally. It has an AUM of $5.49 billion. It charges investors 8 bps in annual fees. The fund also flaunts a Zacks ETF Rank #2 at present with a Medium-risk outlook.

iShares Expanded Tech-Software Sector ETF IGV

This ETF provides exposure to software companies in the technology and communication services sectors by tracking the S&P North American Expanded Technology Software Index. It is popular with an AUM of $5.56 billion. The product charges 46 bps in annual fees and currently sports a Zacks ETF Rank of 1 with a High-risk outlook (read: ETFs To Buy As Zoom Shares Surge On Stellar Q4 Earnings).

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