Make Money in Strong-Potential Tech Stocks the Easy Way


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 stocks to your portfolio, the iShares S&P Global Technology Sector Index Fund 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 iShares ETF's expense ratio -- its annual fee -- is a relatively low 0.48%.

This ETF has outperformed the world markets over the past five years, but slightly underperformed them 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.

Why technology?
Our growing world population will demand more and better high-tech products and services over time, boosting the business of successful technology-oriented companies.

More than a handful of technology-oriented companies had strong performances over the past year. Visa and MasterCard surged 42% and 25%, respectively. Both have been threatened by the growth and potential of mobile and electronic payments, but both have been investing in these areas as well. Visa is the leader in its realm, and is considering buying Visa Europe. MasterCard, meanwhile, is a stronger cash-flow generator and is enjoying strong growth in emerging markets.

Texas Instruments up 8%, has investors bullish about its strong cash flow and its growing attention to industrial applications for its technology. The company is bullish on itself, too, recently hiking its dividend payout by a whopping 33%, so that it now yields about 3.2%. It's also boosting its multibillion-dollar share buyback program, which isn't necessarily good news, as its shares don't seem that cheap right now.

Other companies didn't do as well last year, but could see their fortunes change in the coming years. EMC , for example, shed 21%, in part due to weak near-term guidance in an environment of low IT spending. Still, many see it poised to gain from the rapidly growing cloud-computing and "Big Data" arenas. The company also holds an 80% ownership stake in virtualization specialist VMware, though VMware's dominance in its market may mean slower growth in the future.

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.

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Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, has no position in any stocks mentioned. The Motley Fool recommends Visa and VMware. It owns shares of EMC, MasterCard, and VMware. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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