The boom for Technology ETFs

ETFs have become one of the most popular investment vehicles for both institutional and individual investors globally.

Overall ETFs now boast $1 Trillion AUM, new ETF launches number from several dozen to hundreds in any particular year. ETFs are so popular that many brokerages offer their customers free trading in a limited number of ETFs.

ETFs do offer low-cost diversification, trading and arbitrage options for investors esp. for those looking at specific sector investing.

But in Asia the use of ETFs still seem low key as many investors still do not understand the access, trading and the difference from Mutual Funds.

Also there is the agency problem where many traditional channels in Asia still prefer Mutual Fund due to the Commission structure.

From one fund in 1993, the ETF market grew to 102 funds by 2002, and nearly 1,000 by the end of 2009. According to research firm ETFGI, there are now at least 5,000 ETFs trading globally, with more than 1,750 based in the U.S. (If you include exchange-traded notes, a much smaller category, there is an additional 1,900 globally and another 270 in the U.S.).

Examples of Some Important ETFs :

• The the first ETF (the S&P 500 SPDR) came to life on January 23, 1993. This fund currently has over $260 billion in assets under management.
• The second-largest ETF, the iShares Core S&P 500 ETF (NYSE:IVV) began trading in May of 2000. This fund now boasts almost $182 billion in assets under management and has a one-month average trading volume of 4.2 million shares per day.
• The iShares MSCI EAFE ETF (NYSE:EFA) is the largest foreign equity ETF. The EFA launched in August of 2001 and presently holds about $58 billion in assets.
• The Invesco QQQ (NYSE:QQQ) mimics the Nasdaq-100 Index and presently holds assets of approximately $73 billion. This fund launched in March of 1999.
• Last and not least, the Barclays TIPS (NYSE:TIP) fund began trading in December of 2003 and has grown to over $20 billion in assets under management.

Technology ETFs

Last few years we have seen many Technology focussed ETFs with XLK and VGT the most popular .

But last few years has seen sector /segment specific ETFs emerge which gives a good investment tool/vehicle for those retail investors who are bullish on the focus of specific segments within Technology

So why are Technology ETFs getting popular:

• General interest in Technology

There has been a general interest spiking in Technology oflate with many Retail investors curious on how some of the new technologies like AI, Big Data will transform traditional industries . A big realisation that Technology may start playing more dominant role .

• Segment focussed ETFs

Areas which have suddenly become popular e.g

• Cloud – CLOU & SKYY
• Cybersecurity – HACK & IHAK

So if Retail investors were bullish around a specific sector they can now invest in that segment rather than a broad Tech ETF.

• Volatility of individual Technology stocks

Tech stocks are not boring! Come earnings and there is a big Volatility which at times is unnerving for retail investors. So a Tech ETF gives the upshot without the sudden volatility of investing in individual stocks

Sharing a list of Technology focussed ETFs

Conclusion :

Overall, I am quite bullish on ETFs as an Investment vehicle esp Technology ETFs and am sure we will see more specific segment ETFs come up in near future .