Special 10-Part Series on the Premier Sector Funds: Technology

The technology sector has been an integral part of the markets for a long time.

With growth in artificial intelligence (AI) and an expanding digital economy at the forefront, it is impossible to discuss market climbs without mentioning stocks like NVIDIA Corp. (NASDAQ: NVDA) or Apple Inc. (NASDAQ: AAPL). The technology sector is more than just ChatGPT and the latest iPhone, as it influences other market sectors, including health care and energy.

The backbone of the technology industry is innovation, so the sector can be resilient to market weakness due to its excellent growth potential. Just this week, despite the market showing some signs of slippage, there was a tech-driven rally.

Mega-cap tech stocks and semiconductors led gains, driving the NASDAQ 100 to retest its all-time high, which was reached in mid-November, according to Benzinga.

That is why I want to start out this 10-part series about the industry’s premier exchange-traded funds (ETFs) with the Technology Select Sector SPDR Fund (XLK).

The Technology Select Sector SPDR Fund seeks to provide investment results which, before expenses, correspond to the price and yield performance of the Technology Select Sector Index. That index is intended to provide a representation of the S&P 500’s technology sector.

By investing in XLK, investors gain exposure to some of the largest publicly traded companies in the market. In fact, the top three largest public companies, Apple Inc., NVIDIA Corp. and Microsoft Corp. (NASDAQ: MSFT), respectively, each have a market cap of higher than $3 trillion. All three are included in this ETF.

Unlike investing in individual stocks that carry heightened risk compared to the diversification of funds, XLK covers the entire sector, providing the opportunity for investors to access several of the market’s biggest companies in a single purchase.

Exclusive ETF Talk: Finding Value in Your Brokerage

The fund’s top stock holdings and their respective weightings are Apple Inc., 14.77%; NVIDIA Corp., 14.04%; Microsoft Corp., 12.99%; Broadcom Inc. (NASDAQ: AVGO), 4.48%; Salesforce Inc. (NYSE: CRM), 3.17%; Oracle Corp. (NYSE: ORCL), 3.01%; Advanced Micro Devices (NASDAQ: AMD), 2.61%; Cisco Systems Inc. (NASDAQ: CSCO), 2.47%; Accenture Plc (NYSE: ACN), 2.42% and Adobe Inc (NASDAQ: ADBE), 2.38%.

XLK’s year-to-date total return is 23.3% and it offers a 0.7% dividend yield. It has net assets of $69.4 billion and an expense ratio of 0.9%.

The chart above shows an upward trend, with the fund hovering around its highest point in 2024.

This ETF seeks to track the performance of the technology sector by using a replication strategy, which means that the fund typically invests in almost all the securities represented in the index in about the same proportions as the index. XLK generally invests almost all, but at least 95% of its total assets in the securities that comprise the index.

Investors can acquire a piece of the future of technology through this non-diversified index fund and potentially profit from the innovation that has yet to come.

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.