With the technology sector growing at a phenomenal rate, tech stocks have become the primary growth driver for stock markets. Investors looking to become wealthier by investing in tech stocks might find it challenging to make the right picks for their investment portfolio.
Exchange-Traded Funds (ETFs) can simplify investing by giving you exposure to a basket of stocks. Various ETFs align with different investing goals to match investors with their financial targets.
If you want to reduce the risks of investing in individual stocks and generate wealth over the long term through the tech sector, the best tech ETFs in Canada might be a step in the right direction.
As a tech investor myself, I always been favourable to investing in this high-growth sector. In this Wealth Awesome guide, I will help you find the best tech ETFs in Canada. This guide will help you find a more convenient and lower-risk method of capitalizing on this growing industry.
What is a Tech ETF?
ETFs are being managed by professionals who are well-versed in the stock market investing world. ETF providers have a much better understanding of how to rebalance their asset allocation to align with their investment goals in case any of the individual stocks begin to fall out of line with the desired investment objectives.
A tech ETF is a fund that allocates assets to predominantly or entirely reflect the performance of the tech sector. Multiple providers offer a wide range of ETFs aligning with different investment goals. The best tech ETFs in Canada offer investors exposure to different baskets of securities based on their investment objectives.
Investing purely to align yourself with the tech sector’s performance can carry substantial risk. The tech industry has been booming in recent years, making it an excellent growth opportunity right now. Suppose that there is a significant decline in the industry. In that case, heavy exposure to tech stocks can result in significant losses for you. I highly recommend being careful not to invest too much of your capital in tech ETFs.
A lot of ETFs that I have listed below are not pure tech ETFs. Some of these provide investors with a diverse exposure while focusing primarily on the tech sector.
The 5 Best Tech ETFs in Canada
Here is a look at the five best tech ETFs in Canada that you can consider.
1. BlackRock iShares S&P/TSX Capped Information Technology Index ETF
% of Assets in Technology: 100% as of January 29, 2021
Assets Under Management: $543.9 million as of January 29, 2021
BlackRock iShares XIT is the best tech ETF in Canada if you want to capitalize on the growth of Canadian tech sector companies. The ETF invests entirely in equity securities and can be considered a good reflection of the sector’s growth in Canada.
The ETF’s performance has been prolific over the past few years. With companies like Shopify Inc., Constellation Software Inc., and CGI as three of its top holdings, the ETF provides investors with exposure to some of the top-performing Canadian tech stocks right now. This is the best tech ETF in Canada if you seek to invest in a group of Canadian tech companies without any exposure to other asset classes.
This is a pure-play tech ETF that carries significant risk but very high rewards when the tech sector is performing well. You can read my full BlackRock XIT review here to find out more about the ETF.
2. Invesco QQQ Hedged to CAD Index ETF
% of Assets in Technology: 48% as of February 2, 2021
Assets Under Management: 370 million as of February 2, 2021
Invesco QQC-F seeks to replicate, to the extent possible before fees and expenses, the performance of the NASDAQ 100 Index. The ETF provides investors with exposure to a portfolio of US-based tech companies, aligning their capital growth with the performance of the Invesco QQQ Index hedged to the Canadian dollar. It is not a pure tech ETF, unlike some of the others on the list.
Some of its most significant holdings include the likes of Apple Inc., Microsoft Corp., Amazon.com Inc., and Tesla Inc. The ETF can be an excellent asset to consider if you seek capital growth based on the performance of the US tech sector while mitigating your risk through diverse asset allocation.
3. NASDAQ Golden Dragon China Index ETF
% of Assets in Technology: 26.23% as of February 2, 2021
Assets Under Management: US$ 279.5 million as of February 2, 2021
The NASDAQ Golden Dragon China Index ETF is a modified market capitalization-weighted index of publicly-traded companies in the US, and the majority of whose business is conducted in China. The index is designed to provide insight and access to unique economic opportunities in China. It is not a pure tech ETF, unlike some of the others on this list.
The fund’s top holdings include the likes of Baidu Inc., Pinduoduo Inc., NetEase Inc., and Alibaba Group Holding Ltd. The ETF provides investors with diverse exposure to publicly traded Chinese tech companies. It can be one of the best tech ETFs in Canada you can consider if you want exposure to the growing Chinese tech sector. However, it does not invest as aggressively in the tech sector as the other tech ETFs I have listed.
4. BMO NASDAQ 100 Equity Hedged to CAD Index ETF
% of Assets in Technology: 47.99% as of February 3, 2021
Assets Under Management: $1.38 billion as of February 3, 2021
BMO NASDAQ 100 Equity Hedged to CAD Index ETF has been designed to replicate, to the extent possible net of expenses, the performance of a modified index of 100 NASDAQ-listed companies. The US dollar currency exposure is hedged back to the Canadian dollar. The ETF is not a pure tech play as it provides exposure to a diverse group of non-financial stocks trading in the US.
The ETF has been designed as a growth solution for investors and can be the best tech ETF in Canada to consider if you seek long-term capital growth with exposure to the US tech sector with an additional layer of security through diverse sector weighting.
You can read my full BMO ZQQ review here to find out more about this Canadian tech ETF.
5. BlackRock iShares NASDAQ 100 Hedged to CAD Index ETF
% of Assets in Technology: 48.30% as of February 2, 2021
Assets Under Management: $1.4 billion as of February 2, 2021
BlackRock iShares XQQ is another ETF offered by BlackRock Asset Management that tracks the performance of the iShares NASDAQ 100 Index Fund hedged to the Canadian dollar. It provides investors with exposure to a diverse portfolio of US equity securities. It is one of the best tech ETFs in Canada because it allocates 48.3% of its funds to the tech sector. That also means it is not a pure tech ETF.
The ETF focuses on non-financial US stocks and is similar to BMO ZQQ in terms of its asset allocation and investment objectives. Some of the ETF’s top holdings include Apple Inc., Microsoft Corp., Amazon.com Inc., and Tesla Inc. It can be an excellent asset for you to consider if you want to gain diversified exposure to the US tech sector.
How to Buy The Best Tech ETFs in Canada
My two favourite ways to buy tech ETFs in Canada are the following:
- Questrade – Canada’s leading discount broker, I use Questrade to trade most of my stocks. It has a desktop and mobile trading platform. All Canadian ETF purchases are commission-free, but be aware that selling ETFs will cost a small fee. With this special offer, you can also get $50 of commission-free stock trades here.
- Wealthsimple Trade – Better known as a robo-advisor, Wealthsimple has now released this fantastic trading platform that now comes in both desktop and mobile versions. All Canadian stock and ETF trades are commission-free. Get a $10 signup bonus when you sign up here.
Investing in ETFs can provide you with a low-cost and more convenient method of investing in a basket of stocks. Each of the best tech ETFs in Canada that I have mentioned in this list follows varying investment goals that include the tech sector’s performance. I hope that my list of the best tech ETFs in Canada can help you make a more well-informed decision about investing in ETFs.