The technology sector has been among the best-performing sectors in the last decade. Tech ETFs contain growth companies that manufacture and sell electronic products, software, computers, artificial intelligence and other items related to information technology (IT).

In the tech industry, growth is intense, research and development (R&D) is heavy and valuations are high. In addition to investing heavily in research and development, these companies are likely to take on riskier projects with higher potential rewards. As a result, stocks of these companies are high-risk, high-reward investments.

A growing economy’s technology sector can often be a prime investment opportunity. However, returns are never guaranteed and it can be good to diversify. For example, tech ETFs can be a good way to go. They contain dozens, if not hundreds, of stocks. Here is a list of the five best tech ETFs to buy today.

Top Tech ETFs in 2022

ARK Innovation ETF (ARKK)

Expense Ratio: 0.75%

Holdings: 36

ARK Innovation is a great choice for investors seeking greater risk and higher potential returns. Renowned fund manager Cathie Wood manages this tech ETF. This fund targets companies involved in “disruptive innovation.” It focuses on automation, robotics, artificial intelligence and the Internet of Things.

The ARKK ETF’s past year’s performance is poor with returns of around -60%. However, this tech ETF is designed to be held for at least five years, according to Wood. As a result, investors can capitalize on nascent technology stocks’ potentially explosive growth. In the past five years, ARKK is up roughly 40%.

As of May 22, ARK Innovation has 36 holdings. Its top five holdings are as follows…

• Roku (Nasdaq: ROKU)
• Tesla (Nasdaq: TSLA)
• Zoom Video Communications (Nasdaq: ZOOM)
• Exact Sciences (Nasdaq: EXAS)
• Block (NYSE: SQ)

Cathie Wood actively manages this tech ETF. Moreover, Wood’s active management allows for daily trades based on short- and long-term outlooks for each holding. However, this is why this tech ETF carries a higher expense ratio.

Vanguard Information Technology ETF (VGT)

Expense Ratio: 0.10%

Holdings: 357

The Vanguard Information Technology ETF includes companies serving the electronics and computer industries. It also holds companies that manufacture products based on the latest applied science. This fund tracks the MSCI US Investable Market Information Technology 25/50 Index.

Vanguard often takes a passive index approach with its investment strategy. As a result, this fund’s expense ratio is better than the many other tech ETFs.

VGT holds the stocks of 357 U.S. tech companies. The majority of this tech ETF’s  holdings are large cap growth companies in the systems software, semiconductor and data processing sectors. Its top holdings are…

• Apple (Nasdaq: AAPL)
• Microsoft (Nasdaq: MSFT)
• NVIDIA (Nasdaq: NVDA)
• Visa (NYSE: V)
• Mastercard (NYSE: MA)

VGT’s top five holdings comprise over 51% of its portfolio. In the last year, this tech ETF is down roughly -10%. However, this fund is a long-term investment. So, investors shouldn’t worry about its short-term volatility. In the last five years, this ETF boasts over 130% in growth.

Invesco QQQ ETF (QQQ)

Expense Ratio: 0.20%

Holdings: 102

Invesco QQQ ETF doesn’t focus strictly on the tech sector. In recent years, however, this ETF is known for holding mega-cap growth stocks in the technology sector. Moreover, this fund has a reputation for its outperformance – it’s consistently beat the S&P 500 Index since its inception in 1999.

This tech ETF tracks the performance of the Nasdaq-100 Index. This index consists of the largest 100 U.S. non-financial stocks listed on the Nasdaq exchange based on market cap. Its top five holdings are…

• Apple (Nasdaq: AAPL)
• Microsoft (Nasdaq: MSFT)
• Amazon (Nasdaq: AMZN)
• Alphabet (Nasdaq: GOOGL)
• Tesla (Nasdaq: TSLA)

While this ETF isn’t exclusive to tech, its top five holdings show that it’s very tech concentrated. QQQ’s sector allocations are…

• Information Technology – 50%
• Consumer Discretionary – 17%
• Communication Services – 17%
• Healthcare – 5.8%
• Consumer Staples – 5.5%
• Industrials & Utilities – 4.2%
• Not Classified – 0.20%

QQQ is down 13% in the past year. However, its long-term outlook is strong. This ETF boasts returns of over 100% for investors in the past five years.

iShares Semiconductor ETF (SOXX)

Expense Ratio: 0.43%

Holdings: 35

The iShares Semiconductor ETF focuses on U.S.-based companies within the semiconductor sector. This tech ETF gives investors targeted access to an industry that many people take for granted. Without semiconductor companies, phones, computers, laptops and gaming consoles wouldn’t be what they are today.

As our consumer products become increasingly connected to the internet, semiconductor demand will continue to grow. And this tech ETF can get investors in on some major gains in this expanding sector.

The SOXX ETF is smaller than other tech ETFs on this list with 35 holdings. Its top five holdings are…

• Broadcom (Nasdaq: AVGO)
• Advanced Micro Devices (Nasdaq: AMD)
• NVIDIA (Nasdaq: NVDA)
• Intel Corporation (Nasdaq: INTC)
• Qualcomm (Nasdaq: QCOM)

SOXX is down close to 10% in the past year. However, this tech ETF boasts strong returns for long-term investors. In the past five years, SOXX is up around 160%.

First Trust Nasdaq Cybersecurity ETF (CIBR)

Expense Ratio: 0.60%

Holdings: 41

The First Trust Nasdaq Cybersecurity ETF focuses on tech companies engaged in cybersecurity. This fund tracks the performances of the Nasdaq CTA Cybersecurity Index.

Over the past few years, ransomware attacks and other data breaches have caused cybersecurity services to explode. Securing online assets is essential. Otherwise, companies face heavy regulatory fines and reputational damage. As a result, the cybersecurity industry is booming in recent years. And investors can participate in this growing industry by investing in this tech ETF.

To meet the criteria for the index, each security must meet certain criteria. These companies must…

• be listed on an index-eligible global stock exchange and classified as a cybersecurity company as determined by the Consumer Technology Association (CTA)
• have a market capitalization of at least $250 million
• a minimum three-month average daily dollar trading volume of $1 million
• have a minimum free float of 20%

This tech ETF consists of 41 holdings. Its top five holdings are…

• Palo Alto Networks (Nasdaq: PANW)
• Cisco Systems (Nasdaq: CSCO)
• CrowdStrike (Nasdaq: CRWD)
• Zscaler (Nasdaq: ZS)
• Mandiant (Nasdaq: MNDT)

The First Trust Nasdaq Cybersecurity ETF is down nearly 8% in the last year. However, this tech ETF has grown almost 86% in the last five years. So, this fund is great for investors willing to buy and hold long-term.

The Bottom Line on Tech ETFs

In the future, there will be more technology stocks in the market and investors’ portfolios. Technological advances will improve the quality of life for everyone. Several new technologies, such as the Internet of Things (IoT), blockchain and autonomous cars are ushering in a new era. Moreover, those who are early adopters are well positioned to benefit.

As always, returns are never guaranteed for investors. However, investors can minimize risk by diversifying their portfolios with tech ETFs. And there are many investment opportunities to consider today…

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