Exchange-traded funds (ETFs) are a quick and convenient way to add exposure to certain investment themes.
Put another way, it’s like buying the hay stack instead of looking for the needle within.
In recent years, the tech sector has been one of the most popular hay stacks.
Here are 5 of the best tech ETFs for Canadian investors:
1. iShares S&P/TSX Capped Information Tech Index ETF (XIT)
2. TD Global Technology Leaders Index ETF (TEC)
3. Blockchain & Bitcoin Strategy ETF (BITS)
4. Evolve Cyber Security Index ETF (CYBR)
5. Invesco QQQ ETF (QQQ)
| Ticker | Company | Description | AUM | Return Since Inception |
|---|---|---|---|---|
| XIT | Blackrock | Focused on Canadian information technology companies. | C$712.44 million | 7.38% |
| TEC | TD | Focused on mid- and large-cap tech companies across the world. | C$2.46 billion | 19.82% |
| BITS | Global X | Focused on Bitcoin futures and blockchain stocks. | US$30.82 million | -17.75% |
| CYBR | Evolve | Focused on global companies involved in the cyber security industry. | C$182.71 million | 15.09% |
| QQQ | Invesco | Focused on the 100 largest non-financial companies listed on the NASDAQ stock exchange. | US$256.50 billion | 9.70% |
AUM and Returns as of February 29, 2024
1. iShares S&P/TSX Capped Information Tech Index ETF (XIT)
Canada’s technology sector doesn’t get much attention, but it’s a thriving space.
Shopify (TSX:SHOP) is a household name, however there are plenty of niche enterprise tech companies that have delivered remarkable returns over the past decades.
iShares S&P/TSX Capped Information Tech Index ETF (TSE:XIT) offers investors access to them all.
The fund’s top holdings include some of Canada’s biggest tech names such as Shopify, Constellation Software and CGI Inc.
Over the past ten years, the fund delivered a compounded annual growth rate of 19.23%.
2. TD Global Technology Leaders Index ETF (TEC)
TD Global Technology Leaders Index ETF (TSX:TEC) is focused on the biggest tech companies across the world.
The portfolio includes some of the most successful and well-known tech giants like Apple (AAPL) and Microsoft (MSFT).
The fund has over 232 holdings with investments in the European Union, Japan, and the Canada.
However, since the global technology sector is dominated by the United States, the fund is overexposed to tech giants in this country.
Over 86.70% of the portfolio consists of companies currently based in the US
TEC could be an ideal target for Canadian investors who’re looking to overcome their home bias.
3. Blockchain & Bitcoin Strategy ETF (BITS)
Investors tend to have divided opinions on blockchain technology and digital assets.
While some investors shun the sector, others see it as a critical part of the future digital economy.
For most investors, a little exposure to this trillion-dollar industry would be warranted.
If the technology lives up to its potential, you wouldn’t want to miss out on all that upside.
If it fails, losing a fraction of your portfolio wouldn’t be too detrimental.
With that in mind, The Global X Blockchain & Bitcoin Strategy ETF (NASDAQ:BITS) could be an ideal target.
This relatively new and tiny fund holds Bitcoin futures contracts and the Global X Blockchain ETF (BKCH) in its portfolio.
BITS has seen highs and lows as the industry is highly cyclical but if history repeats itself, BITS could be an ideal target for a long-term investor.
4. Evolve Cyber Security Index ETF (CYBR)
The threat of cyberattacks grows larger with each passing year.
During the pandemic, government agencies and corporations saw a huge spike in the number of attempted cyberattacks.
After that, the war in Eastern Europe put many organizations on high alert.
The demand for digital defense tools could be robust for the foreseeable future.
Investors looking to add this theme to their portfolio could consider the Evolve Cyber Security Index ETF (TSX:CYBR).
The fund’s portfolio includes some of the best digital defense companies in the world, including Palo Alto Networks (NASDAQ:PANW) and Checkpoint Software (NASDAQ: CHKP).
The CYBR ETF has largely recovered from the loss of value it saw in 2022/2023.
As this industry serves a critical need which could mean the industry’s revenue could be more robust than its tech peers.
If you’re looking for a stable long-term growth opportunity, this could be an ideal target.
5. Invesco QQQ ETF (QQQ)
Invesco’s QQQ ETF is, perhaps, one of the most popular ETFs in the world.
Based on trading volume, the ETF is second only to the flagship S&P 500 in the US.
That’s because the fund was one of the first to focus on America’s most critical growth engine: large-cap tech.
The ETF holds the 100 largest technology companies listed on the NASDAQ.
This includes household names such as Apple (APPL) and Amazon (AMZN) alongside lesser-known niche companies like Broadcom (NASDAQ: AVGO).
$10,000 invested in this fund 10 years ago would be worth over $52,000 today based on a 10-year return of 18.14%.
What is a Technology ETF?
Technology ETFs are funds that track the broader tech sector or specific segments of the technology industry.
Over the past two decades, tech has been the driving force behind global economic growth.
From Japan to India, eCommerce, software-as-a-service and smartphone manufacturers have created trillions of dollars in aggregate value for shareholders.
However, not all tech companies are destined for greatness.
For regular investors, picking apart winners and losers from long-term tech trends is a complicated process.
Tech index ETFs, such as QQQ and XIT, could be a better alternative for retail investors.
Instead of picking winners, these ETFs simply track the whole industry.
Over time, the ETFs could outperform most stock pickers.
Key Considerations When Investing in Technology ETFs in Canada
Canada’s tech sector is dominated by enterprise software companies.
The largest and most successful Canadian tech companies are either serial acquirers (such as Constellation Software) or niche enterprise software providers (such as OpenText).
This is reflected in the tech ETFs listed on the Toronto Stock Exchange.
Most Canadian tech ETFs have a hefty exposure to the enterprise tech space.
By comparison, America’s tech index has a diverse mix of eCommerce, social media giants and consumer hardware companies.
Investors need to be aware of this key difference in tech ETFs on either side of the border.
Investors should also consider the management fees and expense ratios of the funds they pick.
These costs could erode some of the long-term expected gains.
Frequently Asked Questions
- What is the best tech ETF in Canada?
- Is QQQ a tech ETF?
- Does Vanguard have a technology ETF?
DISCLAIMER: This is not investment advice. Recommendations are for educational purposes only, presented as a path for you to further research. Please seek independent financial advice before making any financial decisions. PiggyBank is not liable for any investment decisions you make based on the information presented on this website.
