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Tech Tops the Winners List of Past Decade: Best ETFs
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The year 2021 brought with it a rising rate trend in the United States (thanks to stimulus and vaccine distribution) and thus growth stocks started to waver. Since tech stocks are high-growth in nature, the tech-heavy Nasdaq has suffered occasionally this year.
This is because the tech bunch of growth stocks that won during the pandemic-ridden 2020 on low rates got an occasional bashing on rising rates. The S&P 500 is up 21.8% this year versus 18.1% gains in the tech-heavy Nasdaq Composite. The tech ETF has gained about 22.6% in the year-to-date frame.
Tech: A Winner of Past Decade
Having said this, we would like to note that the tech sector has topped the list of top performers in the past decade. The past decade witnessed the rise of social media, cloud computing and artificial intelligence radically changing our day-to-day lives. iPads, fitness trackers, wireless devices, electric cars, and a networking shift from 3G to 5G were some of the key points.
Daily time spent online on mobile devices increased from 32 minutes in 2011 to 132 minutes in 2019, per a Global X report. The report said that the number of global social media users increased from 970 million people in 2010 to 2.96 billion in 2020. EVs on U.S. roads were negligible in 2010. By the end of the decade there were over 1 million of them running on streets.
In 2010, over 90% of data was stored in local servers. By 2019, public cloud storage made up about 30% of this share. The rise of e-Commerce and digital healthcare also deserve mention in the list. Plus, prolonged ultra-easy monetary policy, the announcement of the phase-one U.S.-China trade deal and coronavirus-induced social distancing propelled the tech and semiconductor spaces.
Agreed, the coronavirus scare is ebbing with growing vaccination and may lower the demand for digitization (as social distancing mandates will now be eased). But that does not cut the demand and fundamental strength of the technology sector. This has evolved as a long-term bet.
The sector may be losing now (occasionally) on rising rate worries, but holds strong potential on the fast emergence of the fourth industrial revolution (per Wedbush tech analyst Dan Ives, as quoted on Yahoo Finance).
“New normal” trends like work-and-learn-from-home, increasing digital payments and growing video streaming are sure to stay here for long. Total Tech sector earnings are projected to climb 21.4% in Q3 on 16.4% higher revenues (this compares decently to the 30.3% earnings growth of the S&P 500 and 16.4% revenue expansion), which will follow an earnings growth of 61.5% on 24.5% higher revenues in the preceding quarter (Q2 of 2021).
So, don’t shy away from the tech sector altogether. Rather bet on the ones that are cash rich (like biggies like Microsoft, Alphabet and Apple) and scrape through the volatility.
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Tech Tops the Winners List of Past Decade: Best ETFs
The year 2021 brought with it a rising rate trend in the United States (thanks to stimulus and vaccine distribution) and thus growth stocks started to waver. Since tech stocks are high-growth in nature, the tech-heavy Nasdaq has suffered occasionally this year.
This is because the tech bunch of growth stocks that won during the pandemic-ridden 2020 on low rates got an occasional bashing on rising rates. The S&P 500 is up 21.8% this year versus 18.1% gains in the tech-heavy Nasdaq Composite. The tech ETF has gained about 22.6% in the year-to-date frame.
Tech: A Winner of Past Decade
Having said this, we would like to note that the tech sector has topped the list of top performers in the past decade. The past decade witnessed the rise of social media, cloud computing and artificial intelligence radically changing our day-to-day lives. iPads, fitness trackers, wireless devices, electric cars, and a networking shift from 3G to 5G were some of the key points.
Daily time spent online on mobile devices increased from 32 minutes in 2011 to 132 minutes in 2019, per a Global X report. The report said that the number of global social media users increased from 970 million people in 2010 to 2.96 billion in 2020. EVs on U.S. roads were negligible in 2010. By the end of the decade there were over 1 million of them running on streets.
In 2010, over 90% of data was stored in local servers. By 2019, public cloud storage made up about 30% of this share. The rise of e-Commerce and digital healthcare also deserve mention in the list. Plus, prolonged ultra-easy monetary policy, the announcement of the phase-one U.S.-China trade deal and coronavirus-induced social distancing propelled the tech and semiconductor spaces.
Agreed, the coronavirus scare is ebbing with growing vaccination and may lower the demand for digitization (as social distancing mandates will now be eased). But that does not cut the demand and fundamental strength of the technology sector. This has evolved as a long-term bet.
The sector may be losing now (occasionally) on rising rate worries, but holds strong potential on the fast emergence of the fourth industrial revolution (per Wedbush tech analyst Dan Ives, as quoted on Yahoo Finance).
ETFs in Focus
iShares PHLX Semiconductor ETF (SOXX - Free Report) – Up 570%
iShares Expanded Tech-Software Sector ETF (IGV - Free Report) – Up 452.1%
iShares U.S. Technology ETF (IYW - Free Report) – Up 406.8%
Vanguard Information Technology ETF (VGT - Free Report) – Up 395.7%
iShares Expanded Tech Sector ETF (IGM - Free Report) – Up 393.9%
Invesco DWA Technology Momentum ETF (PTF - Free Report) – Up 376.3%
Technology Select Sector SPDR Fund (XLK - Free Report) – Up 359.4%
First Trust Dow Jones Internet Index Fund (FDN - Free Report) – Up 330.7%
SPDR S&P Software & Services ETF (XSW - Free Report) – Up 312.2%
SPDR S&P NYSE Technology ETF (XNTK - Free Report) – Up 279.9%
Bottom Line
“New normal” trends like work-and-learn-from-home, increasing digital payments and growing video streaming are sure to stay here for long. Total Tech sector earnings are projected to climb 21.4% in Q3 on 16.4% higher revenues (this compares decently to the 30.3% earnings growth of the S&P 500 and 16.4% revenue expansion), which will follow an earnings growth of 61.5% on 24.5% higher revenues in the preceding quarter (Q2 of 2021).
So, don’t shy away from the tech sector altogether. Rather bet on the ones that are cash rich (like biggies like Microsoft, Alphabet and Apple) and scrape through the volatility.