Exchange Traded Funds (ETFs)

ETF Talk: Proceed with Caution Using This ETF

It’s no secret that the technology sector is the current king of Wall Street. The markets have been dominated by large tech companies for years now, and that lofty position has been virtually uncontested for a while.

However, that high standing has recently been put into question. One major factor is the uncertain tariff situation in the United States, as several tech companies rely on foreign manufacturing to create their products. Another factor is artificial intelligence (AI), as many companies have yet to see a return on their investment.

With that in mind, it may be wise to invest in “value tech,” investments that offer a way into the still lucrative technology sector while still providing protections against excessive risk. An exchange-traded fund (ETF) that demonstrates this idea perfectly is the Invesco S&P 500 Equal Weight Technology ETF (RSPT).

RSPT tracks an equal-weighted index of S&P 500 technology companies. While the ETF provides broad coverage of large technology companies, its equal-weighting scheme skews it away from having a market-like portfolio.

Instead of heavily investing in its top securities, RSPT allocates only a fraction of its overall assets to its top 10 holdings. This produces sector tilts, such as an overweight to semiconductors and an underweight to software & information technology (IT) services. The fund has assets under management of around $3.76 billion and an expense ratio of 0.40%. It is currently up 1.47% over the last month, up 10.32% over the last three months and up 10.75% year to date.

Chart courtesy of StockCharts.com.

Top holdings include Arista Networks, Inc. (NYSE: ANET), 2.01%; Western Digital Corporation (NASDAQ: WDC), 2.01%; Teradyne, Inc. (NASDAQ: TER), 1.89%; Advanced Micro Devices, Inc. (NASDAQ: AMD), 1.86%; Corning Inc (NYSE: GLW), 1.84%; Seagate Technology Holdings PLC. (NASDAQ: STX), 1.84%; Oracle Corporation (NYSE: ORCL), 1.78%; PTC Inc. (NYSE: PTC), 1.73%; TE Connectivity plc (NYSE: TEL), 1.73% and Hewlett Packard Enterprise Co. (NYSE: HPE), 1.72%.

Exclusive ETF Talk: Finding Value in Your Brokerage

While value tech is a promising avenue into the technology space, it still carries risk. Investors should always do their due diligence before adding any stock, fund or ETF to their portfolio.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Forecasts & Strategies, Tactical Trader, TNT Trader, Five Star Trader, Bullseye Stock Trader, and The Deep Woods. His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.