3 ETFs to buy if earnings confirm the bottom is in for tech stocks
The stock market appears to be finding its footing in the middle of earnings season, and strong reports from tech giants could add more fuel to the recent rally. The tech earnings season will hit its stride after the bell on Tuesday, with Alphabet and Microsoft reporting. Meta Platforms , Apple and Amazon follow later in the week. This area of the market has been hit hard in 2022, as higher interest rates and growing recession concerns have driven investors away from high growth stocks. But investors have started to dip a toe back into more growth-oriented areas of the market. There have been five straight weeks of inflows for tech funds, and eight for communications services funds, according to Bank of America. Big earnings reports have a tendency to move groups of similar stocks, making exchange traded funds an attractive way to gain exposure. One of the most popular ways to gain exposure to the tech sector is the Vanguard Information Technology ETF (VGT) , which has $39 billion in net assets. The fund has a management fee of just 0.1% and is down about 28% for the year. The Vanguard fund’s top holdings include Apple, Microsoft and Nvidia. For investors looking for a group that is even more beaten down, the iShares Expanded Tech Software ETF (IGV) might be worth a look. The fund has dropped 32% this year and offers higher exposure to names like ServiceNow and Palo Alto Networks . The fund is pricier than the Vanguard option, but still comes in with a management fee of just 0.4%. It has a three-star rating from Morningstar. Most ETFs are market-cap weighted, meaning that the large tech names that are already present in most investors’ portfolios have a big impact on the funds. One way to mitigate this is an equal-weighted ETF, like Invesco’s S & P 500 Equal Weight Technology ETF (RYT). The fund, which has a management fee of 0.4%, is down about 26% for the year. It also has a four-star rating from Morningstar. Investors should be sure to look at a fund’s holdings before buying an ETF for a thematic investment. Some stocks typically thought of as “tech” names, such as Meta Platforms, are classified by some firms as communications services or consumer discretionary and are not always included in information technology ETFs. And some funds that do include all of the big names, like the Invesco QQQ Trust , may also have large exposures to other non-tech companies.
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