Looking to Add More Tech to Your Portfolio? SOXX May Be a Better Fit than FTEC.

Technology remains a primary driver of market performance, but investors can choose between a broad-market approach and a specialized industry tilt.

iShares Semiconductor ETF (NASDAQ:SOXX) offers concentrated, high-volatility exposure to 30 chipmakers, while Fidelity MSCI Information Technology Index ETF (NYSEMKT:FTEC) provides a broader, lower-cost entry into the entire technology sector.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

At 0.08%, the Fidelity fund is significantly more affordable for long-term holders. The iShares fund charges 0.34%, creating a 0.26 percentage point expense gap. While both yields are modest, the Fidelity fund provides a slightly higher payout.

Performance & risk comparison

What's inside

iShares Semiconductor ETF focuses exclusively on the semiconductor segment of the broader technology sector. Its largest positions include Advanced Micro Devices at 8.6%, Micron Technology at 8.2%, and Nvidia at 8.1%. It manages a concentrated portfolio of 30 holdings. The fund launched in 2001. iShares Semiconductor ETF has paid $1.47 per share over the trailing 12 months, which on its recent ~$581.34 share price works out to a 0.30% yield.

Fidelity MSCI Information Technology Index ETF allocates 99.00% to technology and 1.00% to industrials. Top holdings include Nvidia at 16%, Apple at 14.3%, and Microsoft at 8.4%. It holds 288 stocks. The fund launched in 2013. Fidelity MSCI Information Technology Index ETF has paid $1.00 per share over the trailing 12 months, which on its recent ~$282.07 share price works out to a 0.40% yield.

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What this means for investors

It’s no surprise that the technology sector has fueled a majority of the gains in the stock market over the last few years, led by the outstanding performances of companies including Nvidia and Micron Technology. So it makes sense to consider the various ways to gain exposure to technology stocks in your portfolio. The choice between SOXX and FTEC comes down to how specific you want to get, and how these two funds complement other holdings in your portfolio.

SOXX has delivered the more compelling returns over the last few years, as its concentrated focus on semiconductor companies has captured some of the market’s strongest upside. But its limited portfolio also makes it more volatile and more prone to downside if this market trend eases. It’s also much more expensive in terms of fees compared to the FTEC fund.

FTEC takes a broader approach, holding nearly 300 stocks in the broader technology category. This may also be a good way to capture some of the huge upside in technology stocks. But if you already hold the “Magnificent Seven” stocks individually in your portfolio, or even a broad S&P 500 index fund, you may already have enough exposure here. The Vanguard S&P 500 ETF, for example, holds the same top three stocks as FTEC, plus some stocks that aren’t included in FTEC, like Amazon and Alphabet.

If you’re looking to add some additional tech exposure to a portfolio that already includes some broad market funds or individual foundational technology stocks, I like the concentrated approach of SOXX, despite its higher fees and volatility risk.

Sarah Sidlow has positions in Alphabet, Apple, Microsoft, Nvidia, Vanguard S&P 500 ETF, and iShares Trust - iShares Semiconductor ETF. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Micron Technology, Microsoft, Nvidia, Vanguard S&P 500 ETF, and iShares Trust - iShares Semiconductor ETF. The Motley Fool has a disclosure policy.