It’s hard to pick a tech share and get it right. Multitudes already exist with new ones coming on the market regularly. Buying single tech shares means putting your faith in that company to outperform in an extremely competitive industry, however, sitting on the sidelines means watching tech companies become so expensive it’s hard to get a foot in the door.
To further complicate things, not only is it a question of which company to invest in, but which country. With the US markets producing some of the world’s most well-known tech companies, it seems like an easy choice to look overseas for returns.
However, as an Aussie investor, this is easier said than done, particularly if you are trying to invest in multiple countries or gain access to multiple exchanges. But putting tech in the ‘too hard’ basket can mean missing out on staggering returns overseas.
In my view, the solution lies in a global tech exchange-traded fund (ETF):
Morningstar Global Technology ETF (ASX: TECH)
With a ticker like ‘TECH’, this one should be easy to remember. In my opinion, Morningstar have done a great job putting this fund together and I really like the global exposure. Although there are alternative tech ETFs on offer, this one is top of my list.
Country allocation
At the time of writing, the fund’s global allocation is: USA (74.1%), Germany (7.1%), Switzerland (6.2%), Israel (4.1%), Japan (3.8%), Hong Kong (2.4%) and France (2.2%) approx. This is a great spread and really provides that global exposure investors need for the tech industry.
Top 10 holdings
At the time of writing, TECH’s top 10 holdings include: Infineon Technologies (5.0%), Splunk Inc (4.4%), STMicroelectronics (4.4%), Microchip Technology Inc (4.3%), Nice Ltd (4.2%), Broadcom Inc (4.1%), Microsoft Corp (4.0%), Servicenow Inc (4.0%), Zendesk Inc (3.9%) and Guidewire Software (3.9%).
Performance
The fund’s 3-year return at the time of writing clocks in at around 24% per annum and its 3-month return sits at approximately 17%. That’s nothing to sneeze at, considering the current state of the economy. Compared with the S&P/ASX 200 Index (ASX: XJO), which has delivered a 3-year return of just over 4% and a 3-month return of around 10%. I could also provide comparisons to multiple overseas markets, however the value of adding this particular ETF to your portfolio is global diversity and exposure to tech outside of Australia, so it’s pertinent to provide an ASX 200 comparison.
Fees
Something to be aware of with most ETFs is that they have annual fees. TECH has annual management costs of 0.45%. According to CommSec, ETFs on the ASX can range in fees from 0.1% to 1% per year, which puts TECH roughly in the middle as far as costs go.
Trading and investing
Buying and selling ETFs is done in the same way as regular shares, directly through your chosen broker. Simply search for the ETF using the ticker above.
Foolish takeaway
The returns that tech shares can provide are staggering at times. With our world evolving and becoming more digital in nature by the day, I feel that tech shares should form a part of all portfolios, however, choosing the right ones can be both daunting and expensive.
Investing through ASX ETFs such as TECH means exposure to global tech players. Over multi-year periods, compounded returns in tech ETFs can be hard to beat – and you never know, your ETF might just catch the next Amazon!
We hear it over and over from investors, “I wish I had bought Altium or Afterpay when they were first recommended by The Motley Fool. I’d be sitting on a gold mine!” And it’s true.
And while Altium and Afterpay have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $5 a share!
*Extreme Opportunities returns as of June 5th 2020
More reading
- Market close: ASX 200 drops 0.7% today
- Why brokers think you should buy the slumping Woodside Petroleum share price today
- How to pick an ASX 200 share market bubble
- Retail investors behaved differently in the March ASX 200 market crash than the GFC. Here’s how
- Why outperforming ASX retail stocks could be running out of puff
Motley Fool contributor Glenn Leese has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of ETFS Morningstar Global Technology ETF. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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