Investors are attracted to the tech sector for a number of different reasons. They like its potential for growth, looking at some of the tech giants of the past as proof that $1 invested in just the right opportunity could be worth $100 one day.
But regular investors just aren’t skilled enough to identify the next Facebook or Twitter. And by the time they make it to market, many of the new tech giants have already experienced much of their growth.
The safer way to invest in tech is to find a good ETF.
In Canada, the largest technology ETF is the iShares S&P TSX Capped Information Technology Index (TSX:XIT). It’s still a relatively small fund with a market cap of only $53 million, but it does offer a pure play on the sector.
There aren’t that many technology companies in Canada of any size, which means the ETF only holds 22 positions, or 20 excluding U.S. and Canadian dollars.
The largest positions dominate this ETF. CGI Group shares have a 25.3% weighting, followed by Constellation Software at 22.9% and Open Text at 18.8%. In fourth spot is a blast from technology’s past, BlackBerry, with a 9.1% weighting. In total, these four names make up 76% of assets.
Tech stocks aren’t known for paying dividends, and this ETF is no different. It has paid out small dividends at the end of 2013, 2014, and 2015, but they aren’t material. Most dividends paid by the underlying companies get used to pay for management fees, which are somewhat high at a total of 0.62%.
