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Exchange-traded funds (ETFs) can be a really valuable way to get the benefits of diversification. They can also be used to gain target exposure to certain market niches such as technology through tech ETFs.
While S&P/ASX 200 Index (ASX: XJO) may not have much technology exposure, technology exposure can be significantly increased by investing in some funds designed to track an index based on video game or cloud computing businesses.
These are the two technology ETFs I will be writing about in this article. In my opinion, both have a promising future.
Betashares Cloud Computing ETF (ASX: CLDD)
As the name suggests, this EFT focuses on cloud computing businesses.
That means that businesses in this particular portfolio should have the lowest initial share of revenue from cloud computing services. The ETF index was constructed to prioritize companies that generate the majority of their revenue from cloud-based services, BetaShares said.
The fund manager noted the positive trend that cloud computing businesses are exposed to.
Cloud computing is one of the strongest trends in the technology sector and is predicted to continue strong growth as most of the world’s digital data and software applications are still stored outside the cloud.
As of 8 September 2022, these are some of the biggest names in the portfolio: Netflix, Paycom software, Digital Ocean, Qualis, Dropbox, SPS business, Modern technologies, Salesforce.com, Wix.com And Box.
2022 was difficult. The Betashares Cloud Computing ETF is down 34% year-to-date, allowing me to invest at a much cheaper and more attractive valuation.
VanEek Video Gaming & Esports ETF (ASX: ESPO)
The video game sector is another field that has seen a lot of growth in the past decade.
Video games have been around for decades, but in the last few years there has been a huge increase in players. E-Sports in particular is growing in popularity, which is a key reason why I like technology ETFs.
According to VanEyck, the competitive video game audience is expected to reach 646 million people worldwide by 2023.
He said e-sports revenue has increased by an average of 28% since 2015. VanEick said e-sports have created new potential revenue streams from game publisher fees, media rights, merchandise, ticket sales and advertising.
There are a total of 25 holdings in the portfolio. Currently, these are the largest positions in the portfolio: Activision Blizzard, Tencent, Nivea, Roblox, Advanced Micro Devices, Nintendo, Netease.com, Electronic Arts And Bandi Namco.
The VanEck Video Game and eSports ETF is down 27.6% through 2022.
Taking a fool
I like the look of both tech ETFs because the underlying businesses are seeing revenue growth, growing globally, and are now very cheap. This is why I happily shop now.
