Technology ETFs are becoming increasingly popular. ETFs are exchange-traded funds that specifically represent the technology sector of the investment market. This particular segment of the investment market is comprised of companies that deal with hardware, software, semiconductors, telecommunications and the internet. A technology ETF will follow clusters of stocks in any of these given types of companies.

Software ETFs -- Examples of stock in this fund include Microsoft Corporation, SAP AG and Oracle Corporation. Three ETFs that utilize these and other software industry stocks include following:

  • Software HOLDRS (SWH) -- The fund manager for this is Merrill Lynch, Pierce, Fenner & Smith HOLDRS. This ETF is listed on the U.S. AMEX exchange with ticker symbol SWH.
  • iShares Goldman Sachs Software Index (IGV) -- iShares is the fund manager for this ETF. This fund is listed on the U.S. AMEX with ticker symbol IGV and is based on the Goldman Sachs Technology Index (GSO). You are not permitted to buy shares in the index directly.
  • PowerShares Dynamic Software Portfolio (PSJ) -- This ETF is listed on the U.S. NYSE with ticker symbol (PSJ). Invesco PowerShares is the fund manager. Like IGV you cannot purchase shares in the index directly. The fund is based on the Dynamic Software Index (DZC).

Telecommunications ETFs -- Examples of stock in this fund include AT&T INC, Sprint Nextel, and Verizon Communications INC. Three ETFs that utilize these stocks along with other telecommunications stocks include:

  • iShares Dow Jones U.S. Telecommunications (IYZ) -- This fund is managed by iShares and is based on the Dow Jones U.S. Telecommunications Index (DJUSTLT). It is listed on the U.S. AMEX exchange with ticker symbol IYZ.
  • ProShares Ultra Telecommunications (LTL) -- This fund is listed as LTL on the U.S. AMEX exchange and is managed by ProShares ETFs.
  • WisdomTree International Communications (DGG) -- This fund is managed by WisdomTree Investments, INC and is listed on the U.S. NYSE exchange as DGG. The fund is solely based on the WisdomTree International Communications Sector Index (WTICOM).

Semiconductors ETFs -- Examples of stock in this fund include Altera Corp, Texas Instruments INC and Micron Technology INC. Three ETFS involving stocks in the semiconductor industry include:

  • PowerShares Dynamic Semiconductors (PSI) -- This fund, listed as PSI, is listed on the U.S. NYSE exchange and is managed by Invesco PowerShares, It is based on the Dynamic Semiconductors Index (DZE).
  • SPDR S&P Semiconductor (XSD) -- Listed on the U.S. AMEX exchange as XSD, this fund is managed by State Street Global Markets, LLC. It is based on the Semiconductor Select Industry Index (SPSISC).
  • Semiconductors HOLDRS (SMH) -- The fund manager for this is Merrill Lynch, Pierce, Fenner & Smith HOLDRS. This ETF is listed on the U.S. AMEX exchange with ticker symbol SMH.

Despite the recent economic crisis technology ETFs are experiencing a steady increase in returns. Part of this is due to the fact that most technology companies remained in good financial condition through the recession. Furthermore, technologies ETFs are inexpensive to own, which is very attractive to investors at all levels.

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