Managing your own stock portfolio has never been easier. Thanks to the advent of low-cost and tax-efficient exchange-traded funds (ETFs), investors can instantly gain exposure to a basket of companies operating in cutting-edge areas like artificial intelligence (AI), self-driving vehicles, or genomic medicines.
Alternatively, more conservative-leaning investors can employ ETFs to ramp up a portfolio's diversification factor either within or across sectors with little effort. Best of all, several passively managed ETFs have proven to be vastly superior investing vehicles, on multiple fronts (return on capital, volatility, risk, among others), compared to owning individual stocks.
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However, the 30-year evolution of the ETF has created some unique problems for the industry and individual investors alike. Chief among them, the exponential growth in the number of ETFs over the last twenty years – from a mere 123 U.S.-based ETFs in 2003 to approximately 2,970 in 2023 – has made it harder than ever to decide which fund is worth buying and owning for the long haul. If you're looking for an ultra-high growth, medium risk, and low-fee vehicle, though, there is one ETF that stands apart from the crowd.
This tech-heavy ETF is a proven wealth-builder
The Fidelity MSCI Information Technology Index ETF (FTEC 1.63%) is a star among stars. Oriented toward tech giants such as Apple, Adobe, Microsoft, and Nvidia, the FTEC ETF has been a top performer this year.
Since the start of 2023, FTEC has risen by 29.6%, outpacing the 24.8% rise in the Nasdaq Composite this year. However, FTEC isn't a buy simply because of its stellar year-to-date performance. It also compares favorably to other similar ETFs in the high-growth tech space.
Let's dig deeper. Among three of the most popular, passively managed tech-oriented ETFs in existence, FTEC sports the highest tilt toward pure-play information technology stocks. It also comes with an extremely attractive expense ratio, a comparable price-to-earnings ratio relative to its peers, and a similar level of performance year-to-date (see table).
The one minor drawback is the FTEC has considerably fewer total net assets under its umbrella compared to either the enormously popular Invesco QQQ Trust (QQQ 1.54%) or the ultra-low-fee Vanguard Growth Index Fund (VUG 1.82%).
|
Fund Ticker* |
YTD Total Return (%) |
Net Expense Ratio |
Total Net Assets (in Billions) |
P/E Ratio |
IT* Sector Weighting (%) |
|---|---|---|---|---|---|
|
FTEC |
29.6 |
0.08 |
6.9 |
29.5 |
100 |
|
QQQ |
33.7 |
0.20 |
197.3 |
29.4 |
48.6 |
|
VUG |
26.5 |
0.04 |
172.7 |
32.9 |
43 |
FTEC = Fidelity MSCI Information Technology Index ETF; QQQ = Invesco QQQ Trust; VUG = Vanguard Growth Index Fund. Data per Charles Schwab, Yahoo! Finance, The Vanguard Group, and Fidelity Investments. IT = Information Technology.
What about the fund's long-term performance? FTEC's strong showing in 2023 isn't a one-off performance. Since its inception in 2013, the Fidelity-backed fund has delivered a total return of 440%. For reference, the Nasdaq Composite has generated a total return of approximately 266% over this period, while the Invesco QQQ Trust has made shareholders richer by 370%. VUG, while still impressive, has only delivered a 241% total return on investment for shareholders over this 10-year period. Put simply, the FTEC has been one of the best-performing ETFs within its peer group since its inception.
Big picture
Is the FTEC still a buy? While there are some valid valuation concerns regarding many of the top holdings in all three of these tech-oriented ETFs, the long-term trend appears to be favorable. The IT sector is widely expected to benefit from the rapid evolution of generative AI in the years ahead, and the world is quickly embracing the march toward digital payments. Those trends are highly unlikely to lose momentum anytime soon. So, if you have a 10 to 20-year investing horizon, FTEC arguably screens as one of the smartest investments you can make right now.