The Best Tech ETF to Invest $1,000 in Right Now

An ETF can be a solid option for any type of investing. But with tech stocks having a lot of volatility involved, tech ETFs like this one can be the best.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published November 9, 2024 9:15 am EST

Investing in technology-focused exchange-traded funds (ETFs) offers a strategic way to capitalize on the dynamic tech sector. Among the myriad options available to Canadian investors, BMO NASDAQ 100 Equity Index ETF (TSX:ZNQ) stands out as a compelling choice. This ETF provides exposure to the NASDAQ-100 Index, encompassing 100 of the largest non-financial companies listed on the NASDAQ Stock Market.

That means instead of trying to buy up the Nasdaq or pick and choose what works, this ETF does the heavy lifting for you. So, let’s get into what makes this top tech ETF such a strong choice for both stability and growth on the TSX today.

ETF stands for Exchange Traded Fund — Source: Getty Images

Strong performance

As of writing, ZNQ ETF has demonstrated impressive performance metrics. The year-to-date return is 24.48%, with a one-year return of 39.19% and a three-year return of 12.70%. These figures underscore the ETF’s robust performance in recent years.

A significant advantage of ZNQ is its diversified exposure to leading technology companies. The top holdings include some of the top stocks on the market today. These include Apple at 9%, Microsoft at 8%, and NVIDIA at 7.7% at writing. This diversification mitigates company-specific risks. All while allowing investors to benefit from the growth of multiple tech giants.

But it’s not just these top stocks. Sector allocation within ZNQ is predominantly in technology at 51.65%, followed by communication services at 15.84% and consumer cyclical at 13%. This allocation aligns with the evolving landscape of the tech industry, capturing growth across various sub-sectors.

More benefits

There’s more to the dependency on tech stocks, though, for future growth opportunities. The ETF’s structure offers tax efficiency, a crucial consideration for Canadian investors. By holding U.S. equities within a Canadian-domiciled ETF, investors may benefit from favourable tax treatment on dividends and capital gains.

What’s more, there’s the cost. ZNQ maintains a competitive expense ratio, ensuring that investors retain a larger portion of their returns. This cost-effectiveness enhances the ETF’s appeal, particularly for long-term investors seeking to minimize fees. Recent market trends have further bolstered the attractiveness of ZNQ. The technology sector has exhibited resilience and growth, driven by advancements in artificial intelligence, cloud computing, and digital transformation initiatives across industries.

Furthermore, the ETF’s performance has been supported by strong earnings reports from its top holdings. Companies like Apple and Microsoft have reported robust revenue growth, reflecting their dominant positions in the tech market. These earnings reports continue to pour in this month as well, with Nvidia known for announcing near the end of earnings season. So, investors now could see quite a bump in the near future.

Bottom line

For investors seeking a balanced approach, ZNQ stock offers a blend of growth potential and stability. The inclusion of established tech companies alongside emerging innovators provides a comprehensive exposure to the sector’s dynamics. This tech ETF presents a compelling investment opportunity for those looking to capitalize on the growth of the technology sector. Its strong performance, diversified holdings, tax efficiency, and competitive cost structure make it a standout choice among Canadian tech ETFs.