One benefit of technology ETFs and ETFs more broadly is that they make it fairly easy to obtain steady, consistent growth.
If you pick a high-quality ETF that tracks a rapidly expanding sector your investment will indeed almost definitely grow at a fairly reliable pace. That is, as long as it’s in a sector that is not in the midst of a bubble and U.S. equities don’t undergo any big corrections. As a result, it’s not too difficult to find technology ETFs that will deliver consistent growth.
Cybersecurity, cloud computing, and fintech are all delivering consistent, strong growth. Moreover, the technology ETFs that track them enable investors to avoid taking a big hit from one of the few unsuccessful firms within those spaces.
Four ETFs that meet all of the above criteria are:
- Global X Cloud Computing ETF (NASDAQ:CLOU)
- ETFMG Prime Cyber Security ETF (NYSE:HACK)
- ARK Fintech Innovation ETF (NYSE:ARKF)
- Renaissance IPO ETF (NYSE:IPO).
Technology ETFs to Buy: Global X Cloud Computing ETF (CLOU)
Global X Cloud uses fairly strict standards when it comes to choosing stocks to buy. What makes this one of the best technology ETFs to buy is that it purchases the shares of companies that get at least 50% of their sales from software-as-a-service, platform-as-a-service, or infrastructure-as-a-service.
Global X also buys stock in companies that own and manage data and server storage facilities, manufacture or distribute infrastructure and hardware components used in cloud and edge computing, according to ETF.com.
A competing cloud ETF, First Trust Cloud Computing ETF (NASDAQ:SKYY), uses much less stringent criteria, investing in tech giants that are not necessarily primarily cloud-revenue driven. Since Global X Cloud was founded in April 2019, it has roughly doubled, while SKYY has climbed about 80% during the same time.
Additionally, Global X Cloud appears to have been quite consistent; since October 2019, the technology ETF has, for the most part, continuously climbed, with the exception of a brief dive at the beginning of the novel-coronavirus pandemic.
ETFMG Prime Cyber Security ETF (HACK)
Over the years, there have been many costly, high-profile hacks of Americans’ personal data. One of the most recent, and likely the most damaging, was the SolarWinds hack which Washington says hit 9 federal agencies and about 100 private sector companies.
Meanwhile, the rise of connected cars and the Internet of Things revolution has created millions more targets for the hackers.
Given this backdrop, it’s not at all surprising that HACK has become one of the best technology ETFs to buy, turning in consistently strong results over the last several years.
For the last five years, it has almost always consistently trended upwards. Only during the tech downturn of December 2018 and the beginning of the pandemic did it take breaks from its gains.
Its top holdings include some of the best names in cybersecurity, including BlackBerry (NYSE:BB), CyberArk (NASDAQ:CYBR), FireEye (NASDAQ:FEYE), and Palo Alto Networks (NYSE:PANW).
ARK Fintech Innovation ETF (ARKF)
ARKs impressive savvy in the fintech sector makes it one of the best technology ETFs to buy. Boosted by the explosion of e-commerce in the wake of the pandemic, the proliferation of tech-savvy consumers and the rise of ever-increasing capabilities of smartphones, fintech is really taking off.
We can see that from the use of financial-transaction apps like PayPal’s (NASDAQ:PYPL) Venmo and Square’s (NYSE:SQ) CashApp. In developed countries, e-commerce is branching out to new areas like real estate, while e-commerce has now reached many people in developing nations seeking consumer goods.
ARKF has several holdings whose connection to fintech seems tenuous; Pinterest (NYSE:PINS) and Zillow (NASDAQ:Z) are among its top ten holdings, while it also owns Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB).
Still, it’s difficult to argue with the superb track record of one of its managers, Cathie Wood, or with its consistency over the last couple of years. Since its creation in February 2019, Ark Fintech has risen consistently, with the familiar exception of the beginning of the pandemic. It has really taken off over the last year, almost tripling in value since that time.
Technology ETFs: Renaissance IPO ETF (IPO)
Renaissance does not hold only tech stocks. Instead, it buys the shares of companies that have recently launched IPOs and holds the shares for “up to two years,” according to Investor’s Business Daily.
But of course, tech stocks make up a high percentage of many hot IPOs. Indeed, nearly 50% of its assets are in tech stocks. Among the current top five holdings of this technology ETF are Uber (NYSE:UBER),Zoom Video (NASDAQ:ZM), Crowdstrike (NASDAQ:CRWD), and Pinterest.
Renaissance automatically gives investors a piece of the top tech IPOs, while carrying very little risk. The ETF held names like Facebook and Alphabet (NASDAQ:GOOG,NASDAQ:GOOGL) in their early days.
Since January 2019, the IPO ETF has been in a consistent uptrend, pausing only for the beginning of the pandemic. Like Ark Fintech, it has been on fire since April 2020, more than doubling since that time.
On the date of publication, Larry Ramer held a long position in BB.
Larry has conducted research and written articles on U.S. stocks for 14 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Among his highly successful contrarian picks have been solar stocks, Roku, and Snap. You can reach him on StockTwits at @larryramer. Larry began writing columns for InvestorPlace in 2015.