Are these the top tech ETFs to watch in Q1 2024?

Exchange-traded funds (ETFs) are an increasingly popular way to invest in a range of stocks and bonds for new investors.

They allow investors to choose from a ‘basket of securities’: an index, sector, commodity, or alternative, without needing to buy the assets individually.

Unlike mutual funds, ETFs are traded on the stock market, meaning you can buy or sell them at any time during the trading day.

Mutual funds are only traded once daily, so investors must wait until the next ‘trading point’.

As well as convenience, ETFs typically offer low expense ratios and lower broker commissions than buying the constituent assets individually, though they often come with an ongoing charges figure (or OCF).

ETFs can contain all sorts of investments, with technology and IT one of the most popular sectors to invest in.

However, it’s worth noting that an ETF will only ever perform as well as its underlying constituents. For the uninitiated, IG offers an ETF screener that can help to inform your investing decisions — but these five could be some of the ones to watch in future.

Top tech ETFs to watch in Q1 2024

iShares S&P 500 Information Technology Sector UCITS ETF

There are multiple ETFs that provide exposure to US tech stocks, but this BlackRock iShares offering is perhaps the most accessible to UK investors.

The ETF tracks the wider return of the S&P 500 Capped 35/20 Information Technology Index, which has returned 38% this year.

It consists of 64 constituents, and its largest holdings are Apple, Microsoft and Nvidia, in that order.

iShares S&P 500 Information Technology has a reasonably low ongoing charges fee of 0.15%, too.

This ETF may satisfy the growing appetite for tech stocks among retail investors seeking to jump on the AI-charged bandwagon that has lifted US stock markets this year.

The wider S&P 500 is up over 19% year-to-date thanks to the handful of mega-cap tech stocks, nicknamed the ‘Magnificent Seven’, boosting the index upward.

However, it’s worth noting that with the index becoming perhaps too one-sided in favour of tech mega-caps, July saw a special rebalance where some of the weight assigned to the largest tech stocks was reassigned to smaller growth companies.

Nvidia and Microsoft were the two most affected, each losing around three percentage points in terms of allocation size.

​​​Rize Cybersecurity and Data Privacy UCITS ETF

The Rize Cybersecurity and Data Privacy UCITS ETF (CYBR) invests in cybersecurity firms which provide systems that help defend computers, servers, mobile devices, electronic systems, networks and data from malicious attacks.

Cathie Wood, the high-profile American fund manager and CEO of ARK Invest, acquired Rize in September.

This is Wood’s first move into the nascent European ETF sphere where she sees room to grow the space for thematic funds across the Atlantic.

Rize ETF manages more than $450mn across 11 European thematic offerings, and this particular fund will soon be renamed under the ARK remit.

CYBR is Europe’s first cybersecurity and data privacy ETF, and has returned 21% this year.

The ETF reflects the returns of the Foxberry Tematica Research Cybersecurity & Data Privacy Index, which may provide an opportunity for investors concerned about the rise of data security in a digitalised world.

That said, its ongoing charges figure is higher than others in the technology sector, standing at a comparatively pricey 0.45%.

Global X Robotics & Artificial Intelligence ETF

The Global X Robotics & Artificial Intelligence ETF (BOTZ) has been around since 2016 and seeks to invest in companies that could stand to benefit from increased adoption of robotics and AI.

These include firms involved with industrial robotics, non-industrial robots, and autonomous vehicles.

BOTZ’s top sectors are information technology (43.9%), industrials (36.5%) and healthcare (16.5%). Its five largest holdings, which comprise roughly 40% of the total value, are Intuitive Surgical, Keyence, ABB, Nvidia and Fanuc.

Nvidia is again this fund’s biggest weighting, with almost 15% of its holdings allocated here. Shares in the semiconductor firm have risen over 190% year-to-date, driven primarily by investor perception that the company will lead the push into artificial intelligence.

As it stands, Nvidia is the world’s top producer of graphics chips needed for high-intensity AI software.

HAN-GINS Cloud Technology Equal Weight UCITS ETF

The ETF seeks to provide investors with access to companies with significant exposure to cloud computing technology.

Since the coronavirus pandemic, there’s been an increasing demand for cloud hosted applications such as video-conferencing applications like Zoom.

The fund does its best to avoid overexposure to the aforementioned ‘Magnificent Seven’ tech stocks, with less than 10% of its total concentrated here.

Following on from this strategy of avoiding the mainstream, its price-earnings and price-to-book ratios are lower than the Nasdaq and competing tech indices, according to the fund’s outlook.

HAN-GINS Cloud Technology ETF has returned 16.6% year-to-date and the recent acquisition of Activision by Microsoft may see cloud-based technology converge with the video game industry.

Vanguard Information Technology ETF

Finally, Vanguard Information Technology ETF provides perhaps the broadest exposure to the world of information technology.

John Bogle’s method of low-cost passive index investing has proved a success among US retail investors for almost fifty years, and now the firm is aiming to expand into Europe.

Last month, Vanguard reached a key milestone across the continent after its ETF assets under management (or AUM) surpassed €100 billion.

It’s now the fourth-largest provider of ETFs in Europe, leapfrogging UBS Asset Management.

Its management fees are some of the lowest across the industry, and this particular tech ETF charges just 0.1%.

The ETF tracks the performance of the MSCI US Investable Market Information Technology 25/50 Index, a catch-all benchmark of 318 constituents, comprising large, medium-size and small U.S. companies in the IT sector.

Vanguard’s diversified strategy has returned 46% to investors this year, which may appeal to European investors seeking wide exposure to not just the technology firms concentrated in Silicon Valley, but innovative companies across the United States.

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