Back

Software Is Eating the World - Technology ETF Research Thread

This post is all about technology ETFs. Generally speaking, technology stocks have been popular amongst investors because they present both the ability to reinvent old business models and create entirely new ones, which comes with explosive growth potential. At the time of writing, 7 of the top 10 companies by market cap are technology companies.

The technology sector is vast, covering the full value chain of computing – semiconductors, software, hardware, and services, both at the consumer and enterprise level. If a company's core business revolves around any of these categories, it can be considered a technology company. For this reason, the major ETFs contain constituents ranging from Apple to Mastercard to NVIDIA to Salesforce.

Also included in this universe are ETFs that represent more niche pockets of the broader index. So while they are correlated, they have different enough characteristics that you can generally tweak your exposure according to your views. For example, weighting your portfolio more heavily with SKYY may reduce your exposure to tariff-related risk as the constituent companies aren’t trading in physical products. There is also an ETF that follows the Chinese technology sector.

Short exposure is available through TECS and SOXS, which track to 300% of the daily inverse of the Technology Select Sector Index and the PHLX Semiconductor Sector Index, respectively.

Update Backtest





The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.



0

The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.


US Technology ETFs: VGTXLK, TECL/TECS (long/short), FTEC, QQQ

Semiconductors: SOXX, SOXL/SOXS (long/short), SMH:

0

The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.


China: KWEB

Subsector ETFs:

  • IGV: The largest of these ETFs with a market cap of $2.61 billion. Made of companies where most revenue comes from “pure” software, meaning there is no Apple, semiconductors, or Amazon.
  • FXL: Tech stocks in the Russell 1000 that are designated “growth” or “value” stocks. This ETF is considered higher risk/reward than the S&P 500 Tech Index since it contains some companies in the mid-cap range while S&P 500 skews slightly larger. However, it only rebalances once per year so is less likely to track the index closer to the rebalance period. 
  • QTEC: Consists of tech stocks from the Nasdaq 100. The positions are equally weighted, making it less tied to AAPL and MSFT. Despite its high diversification, it can be more volatile as a result of its equal weighting. It has high turnover relative to other ETFs, resulting in higher fees.
  • FDN: Internet-specific stocks that are listed on NYSE or Nasdaq, weighted by market cap and capped at 10%. To be in FDN, the company must generate the majority of its revenue from the internet, so companies like Amazon and Expedia are included but Microsoft and Apple are not. This tends to make it sensitive to consumer spending habits.
  • SKYY: Cloud companies operating Infrastructure as a Service, Platform as a Service, or Software as a Service business models. These companies have recurring revenue models which generally correlates to a high P/E ratio.
0

The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.


Great info! This gives me some new ideas for sure.

0

5yr SPY vs TechnologyETFUniverse components

  86706_1571615929.jpg

 

1

To clarify, that's 5 yr return vs SPY, not price.

0

Update Backtest





0

The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.


Loading...

This discussion is closed