Exchange-traded funds (ETFs) can often be good, safe options for investors to earn capital gains and dividend income.
However, in many cases those returns can be a bit more modest because there are so many different stocks often held in an ETF.
Diversification can minimize risk but it can also negate returns as well.
However, that’s not an issue for the iShares Global Tech ETF (NYSEArca:IXN), which has risen 107% over the past five years. This year alone it has produced returns of nearly 40%.
What makes the stock so appealing is that it is heavily weighted towards to some top tech and financial stocks. Both Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL) each make up more than 15% of the fund’s total holdings. Visa (NYSE:V) and Mastercard (NYSE:MA) make up 4% and 3%, respectively.
The top 10 holdings of the ETF account for more than half (53.7%) of its total assets. In some cases that can be a bit too risky, but in the case of iShares Global Tech, it’s helped the ETF generate some strong returns.
The vast majority of the fund’s assets come from tech stocks, with 86% being in that sector. The remainder comes from financial services at 10.5% and industrials which make up 3.4%.
With the stocks in the ETF averaging a price-to-earnings of just 23, investors aren’t loading up on expensive, overpriced tech stocks.
That helps to minimize the level of risk investors will be taking on by investing in the ETF in case a market correction takes place. And that’s another reason why the fund could be a solid long-term investment to hold in your portfolio.