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What is a Technology ETF?

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  • Written By: A. Leverkuhn
  • Edited By: Andrew Jones
  • Last Modified Date: 26 August 2016
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A technology ETF is a specific kind of innovative financial product that allows investors to buy into a variety of technology stocks in a simple, accessible way. Technology ETFs help traders to make short or long term plays on the technology sector, where ETF funds are structured in specific ways to take advantage of price changes in technology equities. Understanding an “ETF approach” to technology stocks helps investing beginners to be familiar with ETFs as a whole, and simultaneously build a more complex portfolio that includes technology holdings.

The exchange traded fund (ETF) is a fund that includes a “basket” of stocks or other financial products. An ETF can be a straightforward fund that gains on stock rises, or a complex fund that has leverage, magnifying gains and losses. Traders can often sell ETFs during a trading day, and many online brokerage accounts offer easy access to ETFs with low commissions. This has led many investors to pursue ETF trading along with single stock buying and selling.

The technology ETF can have a variety of focuses or a purchase to the technology market. Technology ETFs can be centered around consumer tech stocks, or more esoteric technology companies that manufacture parts for consumer devices. Investors who consider both aspects of the technology sector will be better able to develop their own sophisticated plans for investing in technology.

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In the “consumer electronics” side of the technology sector, investors might buy into technology ETFs that include major technology stocks that dominate a national or regional market. The names of these companies might be entirely familiar to consumers in a given region, or all around the world. They may pursue foreign technology stocks that technology ETF brokers are able to hold through the foreign exchange market.

While consumer minded investors might focus on consumer electronics, other more tech savvy traders might buy into technology ETF options that include stocks with a focus on manufacturing technology like semiconductors, or research technology like nanotech. These more obscure tech plays can produce their own yields, as retailers or consumer tech companies change their demand for raw materials or parts. Investors can also choose a fund that includes both parts of the technology spectrum.

Investors who want to get access to stocks through an ETF should be familiar with all of the tax regulations on these financial instruments in their own country. Understanding how brokers get access to foreign tech stocks is key to figuring out how to build global tech investment strategies. In many situations, using technology ETFs can make this process quicker and easier.

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