Should You Invest in the iShares U.S. Technology ETF (IYW)?

Looking for broad exposure to the Technology - Broad segment of the equity market? You should consider the iShares U.S. Technology ETF (IYW), a passively managed exchange traded fund launched on 05/15/2000.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Technology - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 11, placing it in bottom 31%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $17.46 billion, making it one of the largest ETFs attempting to match the performance of the Technology - Broad segment of the equity market. IYW seeks to match the performance of the Dow Jones U.S. Technology Index before fees and expenses.

The Russell 1000 Technology RIC 22.5/45 Capped Index includes companies in the following sectors: software and computer services and technology hardware and equipment. The Index is capitalization-weighted and includes only companies in the technology industry of the Dow Jones U.S. Total Market Index.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.40%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 0.22%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Information Technology sector--about 89% of the portfolio. Telecom and Industrials round out the top three.

Looking at individual holdings, Microsoft Corp (MSFT) accounts for about 18.36% of total assets, followed by Apple Inc (AAPL) and Nvidia Corp (NVDA).

The top 10 holdings account for about 65.01% of total assets under management.

Performance and Risk

Year-to-date, the iShares U.S. Technology ETF has added about 15.37% so far, and was up about 37.52% over the last 12 months (as of 05/28/2024). IYW has traded between $101.31 and $141.54 in this past 52-week period.

The ETF has a beta of 1.15 and standard deviation of 25.87% for the trailing three-year period, making it a medium risk choice in the space. With about 136 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares U.S. Technology ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, IYW is an outstanding option for investors seeking exposure to the Technology ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

Technology Select Sector SPDR ETF (XLK) tracks Technology Select Sector Index and the Vanguard Information Technology ETF (VGT) tracks MSCI US Investable Market Information Technology 25/50 Index. Technology Select Sector SPDR ETF has $66.72 billion in assets, Vanguard Information Technology ETF has $68.94 billion. XLK has an expense ratio of 0.09% and VGT charges 0.10%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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iShares U.S. Technology ETF (IYW): ETF Research Reports

Apple Inc. (AAPL) : Free Stock Analysis Report

Microsoft Corporation (MSFT) : Free Stock Analysis Report

NVIDIA Corporation (NVDA) : Free Stock Analysis Report

Technology Select Sector SPDR ETF (XLK): ETF Research Reports

Vanguard Information Technology ETF (VGT): ETF Research Reports

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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