A Promising Basket of Market-Beating Tech Stocks

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Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some technology-heavy companies to your portfolio because you expect the world's demand for new and better electronic products and services to grow over the long haul, the First Trust NASDAQ-100-Tech Index ETF (NAS: QTEC) 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 First Trust ETF's expense ratio -- its annual fee -- is 0.60%. The fund is fairly small, too, so if you're thinking of buying, beware of occasionally large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.

This ETF has performed well, beating the world markets over the past three and five years. 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 a low turnover rate of 21%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.

What's in it?
Plenty of tech companies had strong performances over the past year. Hard-drive specialist Seagate Technology (NAS: STX) , for example, soared 62%. It escaped the worst of the damage from the Thailand floods last year, has recovered, and has many excited about its new technology that can store a terabyte of data on a square inch. It also doesn't hurt that deep-value investor David Einhorn has beefed up his stake in the company.

Intel (NAS: INTC) , meanwhile, advanced 24%, as the chip giant has continued growing its market share and has been working to boost its presence in mobile technologies -- debuting in Android smartphones in India recently. It's also expanding into cloud offerings. Bears worry about a slowdown in PC growth, and a $1.3 billion fine from European Union antitrust regulators that Intel is disputing.

Other companies didn't do as well last year, but could see their fortunes change in the coming years. Semiconductor giant Broadcom (NAS: BRCM) was flat, but supplies components for iPhones and other smartphones and is positioned to rake in big profits from the wireless revolution. It seems attractively priced, as well, with a P/E ratio recently below its own long-term average as well as the market average.

Chinese search-engine giant Baidu (NAS: BIDU) shed 21%. Some worry about slowing growth in China, but even slower growth there is solid growth. Others fret about the rise of mobile computing, where Baidu's market share is far smaller than its share of desktop-computer searches. But a deal has recently been struck to include Baidu's engine in iDevices in China, and Baidu is expected to deliver earnings and revenue growth of about 40% next year.

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.

Our current mobile revolution may dwarf any other technology revolution seen before it. To profit off it, check out our special free report "The Next Trillion-Dollar Revolution," which names a promising company at the forefront of the change.

At the time this article was published LongtimeFool contributorSelena Maranjian,whom you canfollow on Twitter, owns shares of Intel, but she holds no other position in any company mentioned.Click hereto see her holdings and a short bio. The Motley Fool owns shares of Baidu and Intel.Motley Fool newsletter serviceshave recommended buying shares of Baidu and Intel. The Motley Fool has adisclosure policy.We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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