Investing in tech stocks can be a great idea for long-term growth investors. As technology evolves, having exposure to the hot new trends can lead to rising valuations, resulting in significant returns for investors.
But the big risk nowadays is that many tech stocks have become overvalued. However, one way you can reduce some of that risk is by not having too much exposure to any individual stock. One exchange-traded fund (ETF) which can help you accomplish that is the Invesco S&P 500 Equal Weight Technology ETF (NYSE Arca:RSPT). As the name suggests, the fund equally weighs stocks in the tech sector of the S&P 500. It is rebalanced on a quarterly basis.
Through the ETF, you’ll get exposure to many top tech stocks such as Nvidia (NASDAQ:NVDA) and Microsoft (NASDAQ:MSFT) but they won’t account for more than just a few percentage points of the ETF’s overall holdings. The fund has 70 holdings, which will provide you with significant diversification but there won’t be too much risk in any one particular stock, which can be crucial should one of them crash on a poor earnings report or underwhelming guidance. The fund has a total expense ratio of 0.40%, which is modest for an ETF.
Year to date, the fund has risen by 19% in value and over the past five years it has doubled. This ETF can give you the best of both worlds: a lot of exposure to top tech stocks while also having some excellent diversification and being able to keep your risk relatively low.
