There are some "standard" technology exchange-traded funds (ETFs) that many investors have in their portfolios. The Invesco QQQ Trust (NASDAQ: QQQ) is the standard Nasdaq-100 ETF, for example, and there are several information technology and tech-focused ETFs with billions and billions of dollars under management.
However, if you want to invest in a specific type of technology stock or don't necessarily want to limit your exposure to only tech-sector innovative companies, here are two outside-the-box ETFs you might want to take a closer look at.
If you don't want to pick winners in chipmaking
Semiconductor manufacturers, also known as chipmakers, are a hot area of the market for investors, and with the rapid rise of Nvidia (NVDA -2.09%), this shouldn't be much of a surprise. As artificial intelligence (AI) technology, cloud computing, consumer electronics, and other applications evolve rapidly in the coming years, there should be no shortage of demand for innovative chip designs.
However, there's no telling who the winners and losers of the semiconductor boom will be. So, one way to get semiconductor stock exposure without trying to figure out which specific companies will perform best is through the iShares Semiconductor ETF (SOXX -0.85%), which tracks an index of 35 semiconductor manufacturers and related companies.
Unsurprisingly, Nvidia is a top holding, but no stock makes up more than 10% of the fund's assets. In fact, Broadcom is the No. 1 position (Nvidia is number two), and AMD, Applied Materials, Qualcomm, and Monolithic Power Systems are also major holdings.
If you're a believer in the concept that a rising tide lifts all ships, using this ETF to take a basket approach to semiconductor stocks could be the best move for you. It has an expense ratio of 0.35%, which is quite reasonable for a specialized ETF like this.
There are innovative companies outside of the tech sector
If you're looking for technology exposure in your portfolio, one problem with traditional tech sector ETFs is that not all innovative companies you might want to invest in are officially part of the tech sector (formally called the information technology sector). For example, Netflix (NASDAQ: NFLX) is officially part of the communication sector, as are social media stocks.
So, the iShares Expanded Tech Sector ETF (IGM -1.34%) could be a smart ETF to add to your portfolio. In a nutshell, it tracks an index of mostly tech sector stocks but also includes technology-related companies that are technically included in the communications and consumer discretionary sectors.
For example, in addition to Netflix, top non-tech-sector holdings include Meta Platforms, Alphabet (Google), Electronic Arts, and Roblox. The point is that you might think these stocks are in the tech sector, but you wouldn't get exposure to them if your ETF were a pure information technology index fund.
Perhaps the biggest drawback is the fund's 0.41% expense ratio, which is relatively high compared to some tech sector alternatives. For example, the Vanguard Information Technology Sector ETF (VGT -1.56%) has a significantly lower cost structure of just 0.10% of assets annually, but you wouldn't get exposure to any of the stocks mentioned in the last paragraph.
Should you invest?
Of course, there is no perfect ETF for everyone -- with the possible exception of a basic, low-cost S&P 500 ETF. That's why there are hundreds of excellent low-cost ETFs to choose from.
These are two solid options for investors who want technology exposure without the need to try to pick individual winners. If you'd like exposure to the chipmaker space or want a broader tech ETF, these could be a good fit for you. Just be sure to compare them with a few alternatives -- when investing in ETFs, it's always a smart idea to shop around.
