The two exchange-traded funds (ETFs) in this article have demonstrated growth and could be worth watching.
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What is an exchange traded fund?
In the above link is a breakdown of an ETF, but in summary it provides investors exposure to a group of assets or businesses through a single investment. You don't have to go out and buy the 100, 500 or thousands of individual businesses yourself.
This would save a lot on brokerage and it also provides instant diversification. This diversification can supposedly lower risks because if there's a problem with one business (or sector) then the exposure to the other businesses and sectors can mitigate that.
Here are two examples of ETFs that are in the technology space and are growing quickly:
Betashares Global Cybersecurity ETF (ASX: HACK)
This ETF is designed to give exposure to the world's leading cybersecurity companies in a single ASX trade. BetaShares, the ETF provider, said that cybersecurity is under-represented on the ASX.
BetaShares also said that with cybercrime on the rise, the demand for cybersecurity services is expected to grow strongly for the foreseeable future.
The fund's portfolio includes global cybersecurity giants, as well as emerging players, from a range of global locations.
It has positions in 40 businesses including Crowdstrike, Zscaler, Okta, Accenture, Cloudflare, Cisco Systems, Palo Alto Networks, Fireeye, F5 Networks and Proofpoint. At the small end of its weightings it has businesses like Tufin Software Technologies, Ribbon Communications and Ultra Electronics.
In terms of geographical diversification, around 90% of the portfolio is invested in US businesses whilst the rest is allocated to countries like the UK, Israel, Japan, France and South Korea.
After including the annual management fee of 0.67% per annum, the Betashares Global Cybersecurity ETF has delivered net returns of 18.3% over the past year and 21.5% per annum over the past three years.
Betashares Nasdaq 100 ETF (ASX: NDQ)
This ETF is designed to give exposure to many of the world's most innovative companies that are revolutionising our everyday lives. It's invested in 100 of the biggest businesses listed on the NASDAQ.
BetaShares said that with its strong focus on technology, the Betashares Nasdaq 100 ETF provides diversified exposure to a high-growth potential sector that is under-represented in the Australian share market.
Many of the world's largest global technology businesses are in the holdings of this ETF. Its top ten holdings are: Apple, Microsoft, Amazon, Tesla, Facebook, Alphabet, Nvidia, PayPal and Adobe.
There are plenty of other recognisable names in its holdings including Netflix, Intel, Booking Holdings, eBay and Zoom. Plus, there are some US-listed overseas tech shares in the holdings too like Baidu, JD.com, Mercadolibre and ASML.
In terms of sector allocation, almost half of the ETF is specifically invested in 'IT'. But there are some non-tech holdings in there such as Costco, PepsiCo, Starbucks, Moderna, Regeneron and Lululemon Athletica which provides diversification.
Whilst all of the businesses are listed in the US, the underlying holdings are certainly not 100% from the US.
Betashares Nasdaq 100 ETF has an annual management fee of 0.48% per annum. Its net return after fees has been 34.4% over the past year. The average net return per annum over the last five years has been an average of 21.5%.
