You're probably aware that the Donald Trump administration has been very actively instituting and tweaking tariffs on various countries. The size and volume of the tariffs can't help but have an impact on our economy and the fortunes of many companies.
Some investors might now be feeling skittish about investing in various companies, worried that they may be adversely affected by tariffs. For those folks, there's an exchange-traded fund (ETF) -- a fund that trades like a stock -- to consider. Whether you have $100 or $10,000 to invest, you might want to check it out.
Image source: Getty Images.
A little about tariffs
But first, a word about tariffs. A tariff is a tax on an import -- which is paid by importers, not foreign countries. So, for example, the U.S. recently placed a 25% tariff on cars manufactured outside the U.S. So the American importer of a $30,000 vehicle would pay 25% of that value ($7,500) to the U.S. treasury.
What would be the effects of that? Well, it would lead to an increase in the price of such cars. A positive effect might be that consumers will choose U.S.-built cars more frequently. But those wanting foreign-built ones will pay a lot more.
According to The Motley Fool's Tariff and Trade Investigation Tracker, the recent tariff on pharmaceuticals is 100%. You can imagine that this could cause some disruption in the industry. There are, though, exemptions for manufacturing in the U.S., so various drugmakers are planning to start making drugs domestically, though that can take a while.
Many industries are now affected by tariffs, including plenty of tech stocks. So if you're an investor very keen on parking your money in growth stocks in the tech sector, what can you do? Well, consider the iShares U.S. Tech Independence Focused ETF (IETC 0.16%).
Meet the iShares U.S. Tech Independence Focused ETF
In case you didn't know, BlackRock is an asset manager, and a massive one at that, recently the biggest in the world, just ahead of the Vanguard Group. BlackRock offers hundreds of ETFs, and a relatively new and interesting one is the iShares U.S. Tech Independence Focused ETF, launched on March 21, 2018.
NYSEMKT: IETC
Key Data Points
The ETF invests in American technology companies that conduct a significant portion of their production within U.S. borders, which can position them to avoid many tariffs. Here are the ETF's recent top 10 holdings:
|
Stock |
Weight in ETF |
|---|---|
|
Broadcom |
13.06% |
|
Palantir Technologies |
11.76% |
|
Nvidia |
9.36% |
|
Amazon |
7.51% |
|
Microsoft |
6.03% |
|
Salesforce |
3.66% |
|
Oracle |
3.55% |
|
Apple |
2.96% |
|
International Business Machines |
2.46% |
|
Cisco Systems |
2.26% |
It's worth noting that while the ETF recently held 101 different stocks, the above 10 make up about 62% of the fund's total value. Indeed, the top two make up roughly a quarter of the ETF's value, and the top four holdings make up about 42%. So this is a fairly concentrated portfolio. If you invest in it, you should have great confidence in these top holdings, as their performance is going to largely determine the ETF's performance.
How has the ETF performed? Well, pretty sweetly: the fund has averaged annual gains of 19.5% over the past five years, which included a 54% gain in 2023 and a 38% gain in 2024. Don't expect this kind of amazing performance every year, though. (The fund lost 33% in 2022, to make that point clear.) But as long as you're bullish on the tech stocks it holds, and as long as you aim to hang on for many years, you stand a good chance of doing quite well.
Don't be surprised if there's a market pullback in the near future, though, and know that tech stocks and other growth stocks sometimes fall especially hard -- though they will usually recover and go on to set new highs.
Despite the concentration, ETFs like this do offer some diversification, which can reduce your risk to some degree. Our Foolish investing philosophy suggests buying into around 25 or more companies and aiming to hold onto your shares for at least five years. It can be time-consuming to follow 25 or more stocks, so opting for an ETF can give you that diversification much more easily.
So give this ETF some consideration, especially if you're worried about the effect of tariffs on tech companies.
