Make Money in Technology Stocks the Easy Way

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Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect technology-heavy companies to thrive, the Technology Select Sector SPDR ETF (NYS: XLK) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The technology ETF's expense ratio -- its annual fee -- is a low 0.20%.

This ETF has performed reasonably well, beating the S&P 500 (INDEX: ^GSPC) on average over the past three and five years, and roughly matching it over the past decade. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.

With an ultra low turnover rate of 5%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.

What's in it?
Several of this ETF's components made strong contributions to its performance over the past year. Enterprise-storage giant EMC (NYS: EMC) gained about 10% over the past year, enjoying robust demand for its offerings even in a lackluster market. Its stake in cloud-computing specialist VMware (NYS: VMW) also bears much potential.

Other companies didn't add as much to the ETF's returns last year but could have an effect in the years to come. Corning (NYS: GLW) shed about 31% over the past year. Its future looks bright, though, as it supplies specialty glass for all kinds of electronic devices, such as LCD TVs, and as its demand grows in regions such as China. Shedding about 14%, telecommunications company CenturyLink (NYS: CTL) didn't please some with its acquisition of Qwest. The company's residential phone service is threatened somewhat as more customers drop land lines for cell phones, but it still draws investors, partly for its hefty dividend of around 9%.

The big picture
Demand for technology isn't going away anytime soon. A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.

Learn aboutthe best dividend ETFs. And if you're looking for some great investments beyond ETFs, consider these10 Stocks for Your Retirement Portfolio.

At the time this article was published Longtime Fool contributorSelena Maranjianowns shares of Corning, but she holds no other position in any company mentioned. Check out herholdings and a short bio. The Motley Fool owns shares of EMC.Motley Fool newsletter serviceshave recommended buying shares of Corning and VMware. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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