Back to top

Image: Bigstock

Should You Invest in the iShares Expanded TechSoftware Sector ETF (IGV)?

Read MoreHide Full Article

Designed to provide broad exposure to the Technology - Software segment of the equity market, the iShares Expanded TechSoftware Sector ETF (IGV - Free Report) is a passively managed exchange traded fund launched on 07/10/2001.

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Technology - Software is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 8, placing it in top 50%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $6.37 billion, making it one of the largest ETFs attempting to match the performance of the Technology - Software segment of the equity market. IGV seeks to match the performance of the S&P North American Technology-Software Index before fees and expenses.

The S&P North American Technology-Software Index includes companies that are producers of client/server, enterprise software, Internet software, PC and entertainment software. The index is a modified-capitalization weighted index.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.43%, making it one of the cheaper products in the space.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Information Technology sector--about 92.50% of the portfolio.

Looking at individual holdings, Adobe Inc (ADBE - Free Report) accounts for about 8.82% of total assets, followed by Microsoft Corp (MSFT - Free Report) and Salesforce.com Inc (CRM - Free Report) .

The top 10 holdings account for about 52.83% of total assets under management.

Performance and Risk

So far this year, IGV return is roughly 24.78%, and was up about 33.40% in the last one year (as of 10/25/2021). During this past 52-week period, the fund has traded between $302.67 and $435.90.

The ETF has a beta of 0.99 and standard deviation of 28.63% for the trailing three-year period, making it a high risk choice in the space. With about 127 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Expanded TechSoftware Sector ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, IGV is an outstanding option for investors seeking exposure to the Technology ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

Invesco Dynamic Software ETF (PSJ - Free Report) tracks Dynamic Software Intellidex Index and the SPDR S&P Software & Services ETF (XSW - Free Report) tracks S&P Software & Services Select Industry Index. Invesco Dynamic Software ETF has $479.85 million in assets, SPDR S&P Software & Services ETF has $598.14 million. PSJ has an expense ratio of 0.56% and XSW charges 0.35%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

Published in