Cloud Infrastructure – continued cloud adoption 9. Which is why technology-based ETFs, or exchange-traded funds, are such popular investments. Investors on the lookout for a fund that provides exposure to a range of large technology companies have taken interest in Fidelity’s technology ETFs.
Whether you’re just starting out or have some experience with ETFs, learning more about Fidelity’s technology ETFs can be useful in guiding your investment decisions.
Here’s a look at the structure of the funds, their historical performance, holdings of the funds and more.
What is Fidelity’s Technology ETF?
Fidelity’s technology ETFs provide exposure to the technology sector. Instead of buying individual technology stocks, an investor can buy into an ETF’s shares and gain exposure to a diversified index of technology companies.
The major advantage of the Fidelity technology ETF is a fund that offers: – Low costs – Exposure to a broad basket of technology stocks – Ease of access and trading on major markets.
One of the more popular Fidelity tech ETFs is the Fidelity MSCIS Information Technology Index ETF (FTEC). Understanding Fidelity MSCIS Information Technology Index ETF (FTEC) The Fidelity MSCIS Information Technology Index ETF FTEC tracks the MSCI USA IMI Information Technology Index. It has the following goals: – To duplicate the performance of large U.S.
Technology firms – To keep costs low – To provide investors access to the technology sector for long-term capital appreciation. Because of the passive nature of the fund, Fidelity FTEC usually has an expense ratio that is significantly lower than that of other actively managed funds. Why Investors Favor Fidelity Tech ETF There are a number of reasons why Fidelity’s tech ETF ranks highly among available funds.
1.
Extremely low expense ratio. Savings can compound faster the lower the ETF management fee 2. Diversification. With the Fidelity technology ETF, investments aren’t performance-dependent on any one company.
Instead, the investor gains exposure across many firms.
3. Consistent long-term growth. While no one can predict future results, technology has historically been one of the fastest-growing market segments in the past couple of decades.
4. Simplicity. A Fidelity technology ETF can encompass hundreds of stocks with a simple purchase, saving you time managing individual stocks.
How has Fidelity Tech ETF Performed?
Long-term investors consider things such as: | Performance Measurements | Benefits | |————————|——————————————————–| |Long Term Performance| Historically tech ETF has enjoyed robust performance. | |Volatility| Focus on the performance fluctuations of the ETFs. | |Expense ratios| Lower ratios benefit investors through fewer costs. | |Dividends| Additional income for investors.
| |Composition of Funds| The kinds of tech stocks cover.
Investors need to find one compatible with the company’s goals. Historically, tech ETFs have provided robust sustained returns, and the Fidelity Tech ETF has been no exception. Top Holdings within Fidelity FTEC While market returns depend on the included companies, a good principle to follow is that investments should focus on top companies within industry.
Top holdings within Fidelity include: – Apple – Microsoft – NVIDIA – Oracle – Adobe – Cisco Systems – Sales Force – Zendesk – Accenture – Equinix These companies excel in areas such as: – Cloud computing – Cybersecurity – Semiconductors – Enterprise technology – Artificial Intelligence – Software How does Fidelity Tech ETF Compare to Other Technology ETFs? Investors often compare the Fidelity ETFs to other available tech funds. Here are some examples: | ETF | Expense Ratios | Investment Style | Best For | |———————|———–|————–|————————————————–| | Fidelity MSCIS Information Technology ETF (FTEC) | Very low | Passive | Investors who want to buy into the technology sector for the long term | |Vanguard Information Technology ETF (VGT) | Low | Passive | Investors who want broad exposure to technology sector | XLK | Low | Passive | Top holdings in large-cap industry | QQQ | moderate | Growth | Instead of specific industry, focus on Nas docs ETF Based on these comparisons, Fidelity appears to be one of the best providers of the technology ETF for those who are low-cost investors and want broad sector exposure.
Trends Fueling ETF Success Sure, digital and cloud computing have driven Apple and Microsoft investment success.
However, several trends appear set to grow along with Fidelity’s holdings. 1. Artificial Intelligence – Businesses are expanding rapidly in areas such as: – Smart Applications – AI services 2. Cloud computing – Infrastructures are moving to cloud networks, increasing demand for enterprise and security software.
3.
Semiconductors – Advanced chips are leading growth in: – Electric vehicles – AI – Smartphones 4. Cybersecurity – With many companies facing increasing security threats, demand for cybersecurity solutions for all lengthens. Benefits of Fidelity Technology ETF Investing While technology offers the potential for growth, investors should understand the advantages: 1.
Diversification. Investors get access to hundreds of technology stocks without a need for individual research. 2.
Lower individual company risk.
Even if one of the holdings in the fund had a poor performance, it would be unlikely for the entire fund to suffer. 3. Growth potential. With so many tech companies focusing on innovation, there’s solid chances for capital gains.
4.
Ease of managing an ETF. Buying a Fidelity technology ETF is more straightforward than identifying a group of technology stocks to buy and monitor. Risks of Investment in Fidelity Technology ETFs While technology may be the sector of the moment and offer value for the long-term investor, there are some risks involved in investing: 1.
Market volatility. Technology stocks tend to rise and fall at a more volatile rate than other stocks. 2.
Rate Fluctuations.
Tech stocks tend to be heavily-reliant on lower interest rates, and their values tend to fall as the rates rise. 3. Sector focus. Investors need to recognize the sector home of the ETF to understand the risk exposure.
4.
Competition. Technologies are continuously developed. Those leading today may not lead tomorrow.
Is Fidelity Technology ETF Suitable for Long-Term Investors?
For investors with a focus on wealth accumulation over the medium to long term, the Fidelity, for the reasons listed above, may be a good choice. An investor with a shorter-term focus may consider balancing tech ETF holdings with those in more stable and defensive sectors.
How to Create an Investment Strategy with Fidelity Fidelity offers a number of funds all with a different goal.
While technology does have the potential for growth, diversification across other sectors can lower overall portfolio volatility: | Asset Type | How much | |——————-|——–| | Technology ETF | 25% | | International Stock ETF | 20% | | Broader market ETF | 40% | | Fixed Income (bonds) | 15% | The use of the various types of ETFs to meet diverse objectives is often referenced as a tailored or diversified ETF portfolio. How does the Fidelity Information Technology ETF fit into a diverse investment portfolio? A growth mandate would tend to have a larger proportion of the Fidelity Information Technology ETF holdings. A long-term retirement-oriented fund may tend to use the Fidelity ETF as part of a broader, more diversified fund.
Investors seeking a more aggressive growth profile would likely have a larger Fidelity ETF weighting.
How Does the Low Expense Ratio of Fidelity FTEC Make a Difference? One obvious reason long-term investors may prefer Fidelity’s technology ETFs is the low fees involved: – Cost savings compound over the years – The impact of higher relative costs becomes amplified over time. – Lower costs add up to higher gains generally in the long term. Who is the Fidelity MSCIS Information Technology ETF 0.
Capitalizing on long-term technology innovation, this ETF aims for long-term capital appreciation in the same way as many other Fidelity ETFs. This may appeal to investors who: – Need a new other way to widen sector exposure. – Recognize the growth potential in technology. – Have a long investing timeline. Those approaching retirement may consider funds that balance growth with stability of return.
What Are Alternatives to Fidelity FTEC?
Investors may prefer other tech ETF providers.
How do they compare?
| ETF | Expense Ratio | Investment Style | Best For | |——————|————–|————–|————————————————–| | Fidelity MSCIT Information Tech ETF (FTEC) | Very low | Passive | Investors who will buy into long-term technology sector growth | |Vanguard Information Technology ETF (VGT) | Low | Passive | Investors who want broad sector exposure to technology | XLK | Low | Passive | Investors looking for large-cap firms | QQQ | moderate | Growth | Investors who will buy into Nasdaq related firms | Clearly Fidelity FTEC ranks highly in low fund management fees, though different ETFs will be suitable for different needs. As technology continues to develop at a rapid rate, certain patterns seem to point toward growing prospects for: 1.
Artificial Intelligence (AI) – implications for both software and hardware 2.
3. 4. 5.
6. 7. 8.
Cloud Infrastructure – continuing migration to the cloud 9.
10. 11. Semiconductors – growth with electric vehicles, AI, data centers and mobiles 12. 13.
14.
Digital Payments – mobile and other technology-driven payments 15. 16. 17.
Cybersecurity – increased risks leading to greater spending in this field. 18. 19.
20.
Edge Computing – 21. 22. 23. 24.
Autonomous Vehicles – 25.
29. Even with the constant evolution in the sector and the rise of companies such as Apple, Amazon, Tesla and many others that have gained recognition over the years, the technology sector is showing no signs of slowing down. Conclusion For the long-term investor, the Fidelity ETF has proved relatively successful thanks to their focus and low costs.
Investors that are considering other funds should consider the Fidelity Information Technology ETF alongside other funds to create a diverse portfolio with broad exposure.