Tech ETFs: A Look at Undervalued Options
Tech exchange-traded funds (ETFs) have become some of the top-performing investments in recent decades. They allow investors to tap into a broad spectrum of leading technology stocks all in one place. This includes big names like Nvidia and Apple, along with lesser-known yet promising players like Sandisk and Micron Technology.
Several well-known tech ETFs have provided substantial returns for investors over the years. Popular choices include the Invesco QQQ, Vanguard Information Technology ETF, State Street Technology Select SPDR ETF, and iShares US Technology ETF.
However, there’s one ETF that often gets overlooked yet has consistently outperformed others: the Invesco Dorsey Wright Technology Momentum ETF. If you’re considering tech ETF options, you might want to add this one to your radar.
The Best Invesco ETF — It’s Not QQQ
The Invesco Dorsey Wright Technology Momentum ETF is based on the Dorsey Wright Technology Technical Leaders Index, which tracks at least 30 tech stocks from around the globe that demonstrate strong relative strength or momentum.
This ETF selects stocks that rank high in momentum based on a unique methodology. It includes a diverse range of technology stocks, spanning small-cap to large-cap companies.
Currently, the ETF has 40 stocks in its portfolio, with SanDisk, Nvidia, and Apple being the three largest holdings. It also includes smaller companies like CACI International, InterDigital, and Vistan Networks.
Launched in 2006, this ETF has delivered an average return of 21% per year. Over the past 1, 5, and 10 years, its annualized returns were 88%, 23%, and 26%, respectively—surpassing the larger tech ETFs mentioned earlier over each time frame. Notably, as of May 21st of this year, the ETF has returned an impressive 58%.
While it does have a higher-than-average expense ratio of 0.6%, its strong performance tends to justify this cost.
Investors should keep in mind that this is a concentrated, sector-specific, aggressive growth ETF, which means it can experience significant volatility. However, its broad coverage of trending tech stocks has allowed it to outperform the Nasdaq even during challenging market conditions, like in 2022.
For those looking to diversify their portfolio, this consistently undervalued ETF could be a valuable option, as it typically holds some of the top-performing tech stocks. Just remember, given its nature as an aggressive sector fund, it should probably comprise a small part of a diversified investment strategy.
