7 Best Tech ETFs to Buy in 2022

Technology is the largest sector in the S&P 500 index in terms of market capitalization.

These are businesses that design, manufacture, and sell electronic products and services. Software, semiconductor, smartphone, computer, video game, cloud networking, social media, and artificial intelligence companies are common examples.

Technology has a "boom or bust" reputation as a sector. Back in the late 1990s, tech stocks reached all-time highs before collapsing during the dot-com boom, resulting in three years of losses from 2000 to 2002.

During the 2020-2021 low-interest-rate bull market, tech stocks rose again, powered by megacaps such as Apple Inc. (ticker: AAPL) and Alphabet Inc. (GOOG, GOOGL). This good fortune ended in 2022, when rising interest rates, skyrocketing inflation, and ongoing supply chain concerns harmed company revenues and earnings. Investors who want to bet on the next tech bull run can do so using the following exchange-traded funds, or ETFs:

  • Invesco QQQ ETF (QQQ)
  • ProShares UltraPro (TQQQ)
  • Technology Select Sector SPDR Fund (XLK)
  • Direxion Daily Technology Bull 3X Shares (TECL)
  • Vanguard Information Technology Index (VGT)
  • Invesco S&P 500 Equal Weight Technology ETF (RYT)
  • ARK Innovation ETF (ARKK)

Invesco QQQ ETF (QQQ)

QQQ is not a pure-play technology sector ETF, but it has become a favorite for investors aiming to overweight their domestic tech stock allocation in recent years.

The ETF tracks the Nasdaq-100 Index, which is a market capitalization-weighted index of the top 101 nonfinancial companies listed on the Nasdaq exchange. Approximately 50% of the ETF is now weighted toward technology sector equities, many of which are megacap businesses that dominate the ETF's top holdings and so affect its overall performance.

Because of its large daily volume and well-developed options chain, QQQ is popular among investors trying to trade the sector in the near term. The ETF has around $164 billion in assets under management and a 0.2% expense ratio. This equates to about $20 for every $10,000 invested annually.

ProShares UltraPro (TQQQ)

Investors seeking greater exposure to the performance of the Nasdaq-100 can use a leveraged ETF such as TQQQ.This ETF seeks a daily return three times that of the Nasdaq-100. If the Nasdaq-100 rises by 1% in a single day, TQQQ will rise by 3%, and vice versa if the index declines.

The leverage objective, on the other hand, is reset daily. Due to volatility drag and compounding, TQQQ's returns may not be exactly three times those of the Nasdaq-100 over longer holding periods such as a month or year. The ETF is extremely expensive, with a high expense ratio of 0.95%.

Technology Select Sector SPDR Fund (XLK)

Each of the 11 ETFs offered by fund manager State Street monitors a certain industry that is included in the S&P 500 index. Investors can purchase XLK, which tracks the Technology Select Sector Index, to gain pure-play exposure to tech sector equities.

Apple and Microsoft Corp. (MSFT) account for 46% of the entire market capitalization of the 76 S&P 500 tech equities that make up the XLK ETF. This ETF is therefore not extremely diversified, but for bullish investors seeking concentrated exposure to the present top U.S. tech sector equities, that may be desirable. The expense ratio for XLK is 0.1%.

Direxion Daily Technology Bull 3X Shares (TECL)

Due to its allocation toward non-tech sectors including consumer staples and industrials, TQQQ may not appeal to investors seeking leveraged exposure to tech equities. TECL, which seeks a daily return three times that of the S&P Dow Jones Technology Select Sector Index, is a fantastic choice in this case.

TECL is likely to gain or lose 3% in a day if the index increases or decreases by 1%. Similar to TQQQ, holding for extended stretches of time is not advised because of the volatility drag and unpredictable return compounding. TECL might be a decent substitute for using margin or options for swing or day traders. The expense ratio for the ETF is high at 0.94%.

Vanguard Information Technology Index (VGT)

VGT can be an option for investors seeking more diversified exposure to the technology sector than large-cap equities owned only in the S&P 500 or Nasdaq-100. This ETF follows the 359 U.S. tech sector equities that make up the MSCI US Investable Market Information Technology 25/50 Index.

Apple and Microsoft are among the top holdings, along with semiconductor behemoth Nvidia Corp. (NVDA) and payment processor Visa Inc. (V). Nevertheless, because of its market capitalization-weighted methodology, VGT is somewhat concentrated. The top 10 equities in the ETF make up about 60% of its holdings, which has a significant impact on the performance of the ETF as a whole. Expense ratio for VGT is 0.1%.

Invesco S&P 500 Equal Weight Technology ETF (RYT)

Leading large-cap businesses frequently have the best stocks in the U.S. technology sector. These businesses often make up the majority of the top holdings in a market-cap-weighted index where they are held.

This can be avoided by purchasing equal-weighted ETFs like RYT. This fund owns the technology stocks that make up the S&P 500 index, but it gives each one nearly the same weight. As a result, a major company like International Business Machines Corp. (IBM) receives the same 1.4% allocation as Cadence Design Systems Inc. (CDNS).

In contrast to the majority of technology sector ETFs, RYT has a substantial 44% allocation to mid-cap companies. However, the equal-weight strategy increases fund turnover, which leads to a 0.4% higher expense ratio.

ARK Innovation ETF (ARKK)

In "disruptive" industries like automation, battery technology, AI, spaceflight, robots, cryptocurrencies, and the "internet of things," to mention a few, small-cap technology companies frequently represent the up-and-coming innovators in these sectors.

Since they have to put research and expansion above all else in order to achieve their goal of making a breakthrough, these businesses frequently engage in extremely speculative activities with high cash burn rates and negative earnings.

Investors who are willing to take on some risk and are interested in these stocks can purchase ARKK, which is actively managed by Cathie Wood and her staff. Tesla Inc. (TSLA), Teladoc Health Inc. (TDOC), and Coinbase Global Inc. are among ARKK's top holdings (COIN). The expense ratio for the ETF is 0.75%.

These ETFs offer more diversified exposure to technology stocks for bullish investors.