Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you’d like to add some tech-heavy stocks to your portfolio, but don’t have the time or expertise to hand-pick a few, the SPDR Morgan Stanley Technology (ETF) (NYSEARCA:MTK) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this technology ETF to invest in lots of them simultaneously.
The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The technology ETF’s expense ratio — its annual fee — is a relatively low 0.50%. The fund is fairly small, too, so if you’re thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
This technology ETF has performed reasonably well, inching ahead of the world market’s performance over the past three and 10 years, and beating it handily over the past five. As with most investments, of course, we can’t expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
Why a technology ETF?
A technology ETF is an attractive prospect because our growing world population will demand more and better high-tech products and services over time, boosting the business of successful technology-oriented companies.
Network storage specialist NetApp Inc. (NASDAQ:NTAP), also held by this technology ETF, surged 38%. The company initiated a dividend this year, and it’s yielding 1.6%. The company’s operating system, ONTAP, has been rated well, and has gained market share, too. Some wonder whether NetApp might end up acquired by another major data player, such as Oracle Corporation (NASDAQ:ORCL), while others are hoping that an activist investor might help the company’s prospects. Meanwhile, the stock is significantly shorted, and the company has announced layoffs, and boosted its share buyback plans. It still looks attractive to some, in part due to strong free cash flow.
Corning Incorporated (NYSE:GLW), up 25%, has been enjoying solid demand for its Gorilla Glass, which generated more than $1 billion in 2012 revenue. Some have high hopes for its partnership with View and its tint-adjusting glass, and XXX. The company has hiked its dividend recently (it yields 2.7%), and gave a big boost to its share repurchase program, though buybacks don’t always turn out to have been good things. Corning’s forward P/E of 10 makes its stock seem attractively priced, though.
NVIDIA Corporation (NASDAQ:NVDA), one of the biggest mobile-application processor companies, gained 20%. You know a company is facing some challenges when articles about it refer to “hail Marys” in their titles. NVIDIA recently delayed its handheld gaming hardware launch, and took a hit — it dropped the price for it, too. Its entry into the mobile IP licensing business has some hopeful, and many like its strong position in gaming, though others balk at its forward P/E near 16.
The big picture
Demand for technology isn’t going away anytime soon. A well-chosen ETF, such as this technology ETF, can grant you instant diversification across any industry or group of companies — and make investing in and profiting from it that much easier.
The article A Simple and Promising Technology ETF Investment originally appeared on Fool.com.
Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, owns shares of Microsoft and Corning. The Motley Fool recommends Corning and NVIDIA. The Motley Fool owns shares of Corning, Microsoft, and Oracle.
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