These 3 Tech ETFs Can Go Up by 120% in 5 Years

You don’t have to pick tech stocks to outperform the stock market. Tech ETFs simplify the entire process by giving you exposure to a basket of stocks in the hottest sector. Some tech ETFs focus on the Magnificent Seven stocks, while others go for under-the-radar opportunities. 

Tech ETFs can also rally nicely during bullish markets. Some tech companies boast high revenue growth while expanding profit margins, and those same tech stocks are in some of the top ETFs. Picking ETFs is a lot easier than picking stocks since these funds focus on certain themes and sectors, but these three options can streamline your research.

Invesco QQQ Trust (QQQ)

The Invesco QQQ Trust (NASDAQ:QQQ | QQQ Price Prediction) is one of the most recognizable tech ETFs. This fund has been tracking the Nasdaq 100 since 1999 and continues to outperform the S&P 500. The Magnificent Seven stocks make up a large portion of this ETF’s total assets, much to the delight of long-term investors. 

The fund has an annualized 19.6% return over the past decade, and while an annualized 18.6% return over the past 15 years is slightly lower, it still shows excellent consistency. Nvidia (NASDAQ:NVDA), Apple (NASDAQ:AAPL), and Microsoft (NASDAQ:MSFT) are the three largest holdings, and its top 10 positions make up more than half of the entire portfolio.

Almost all of the ETF’s capital is allocated toward large-cap stocks, with not a single penny allocated toward small-cap stocks. That’s what investors can expect from a fund that follows the Nasdaq 100, which prioritizes companies based on their market caps. QQQ only has a 0.20% expense ratio.

Vanguard Growth Index Fund ETF (VUG)

The Vanguard Growth Index Fund ETF (NYSEARCA:VUG) is another classic tech ETF that was launched in 2004. It also has a history of solid long-term returns, including an annualized 17.5% gain over the past decade. This Vanguard ETF only has a 0.04% expense ratio, which means you get to keep almost all of your gains.

Magnificent Seven stocks once again make up a large portion of the fund’s total assets. However, it’s more top-heavy with its top 10 holdings making up more than 60% of its total assets. More than half of its assets are in tech stocks.

VUG places a strong emphasis on large-cap stocks, but it prioritizes large-cap growth stocks, while QQQ is a little more diversified with its large-caps. The Vanguard fund has some mid-cap stocks but zero small-cap stocks.

iShares Semiconductor ETF (SOXX)

The iShares Semiconductor ETF (NASDAQ:SOXX) is the winner on this list if you’re looking at long-term annualized returns. Despite the recent excitement around AI, this fund has been delivering solid gains since 2001, back when the focus was on semiconductor chips in general instead of AI chips.

SOXX has a 0.34% expense ratio, but an annualized 27.2% return over the past decade makes it easy to look the other way. Most investors will barely feel a 0.34% expense ratio as it is. This ETF is less diversified since it only has 31 stocks and puts everything into the tech sector. Its top 10 holdings also make up almost 60% of its total assets. Broadcom (NASDAQ:AVGO), Advanced Micro Devices (NASDAQ:AMD), and Micron Technology (NASDAQ:MU) lead the way as the fund’s three largest holdings. All three of them make up more than 20% of SOXX’s total assets.

The fund places an emphasis on large-cap stocks like the other funds, but 4% of its capital goes toward small-cap stocks. In that regard, it’s more diversified than QQQ or VUG, but you will want a broad ETF for diversification across sectors.