Technology index funds are good for diversifying your portfolio, especially if you want faster growth than any other sector on the U.S equity market. There are two main tech ETFs: Fidelity MSCI Information Technology Index ETF (FTEC) and Technology Select Sector SPDR Fund (XLK). Both have similar holdings but their underlying benchmarks are different. This article will explore the differences between FTEC and XLK so you can make an informed decision about which one best suits your needs as an investor.
FTEC vs XLK: What Are the Differences?
- The Technology Select Sector SPDR Fund (XLK) is a passively managed exchange-traded fund that seeks to track the Technology Select Sector Index. The Fidelity MSCI Information Technology Index ETF (FTEC) is also a passively managed exchange-traded fund, but it seeks to track the MSCI USA IMI Information Technology Index.
- XLK has significantly more assets under management than the FTEC, 47.99 billion and 6.69 billion, respectively.
- The expense ratio of FTEC is 0.08%, whereas the expense ratio of XLK is 0.12%. This means the Fidelity Tech ETF is cheaper than the SPDR Tech ETF.
FTEC vs XLK: How Are They Similar?
- Both ETFs consist of securities from U.S. companies that develop, manufacture, and distribute information technology products and services.
- FTEC and XLK pay dividends every quarter. Their dividend yields are also similar (0.70% and 0.69%).
- Their turnover rate is very low, which is excellent for investors. You don’t want to invest in an ETF with a high turnover rate because they tend to include more expenses, higher tax costs, and more volatility than needed for a passively managed fund.
FTEC vs XLK: Portfolio Composition
The Technology Select Sector SPDR Fund (XLK) and the Fidelity MSCI Information Technology Index ETF (FTEC) are large-cap funds with similar sector allocations.
FTEC Top 10 Holdings
| COMPANY | SYMBOL | TOTAL NET ASSETS |
|---|---|---|
| Apple Inc. | AAPL | 21.57% |
| Microsoft Corp. | MSFT | 17.65% |
| NVIDIA Corp. | NVDA | 5.40% |
| Visa Inc. Cl A | V | 2.69% |
| Mastercard Inc. | MA | 2.33% |
| Broadcom Inc. | AVGO | 2.01% |
| Adobe Inc. | ADBE | 1.99% |
| Cisco Systems Inc. | CSCO | 1.96% |
| Accenture PLC Cl A | ACN | 1.93% |
| Salesforce Inc. | CRM | 1.83% |
XLK Top 10 Holdings
| COMPANY | SYMBOL | TOTAL NET ASSETS |
|---|---|---|
| Apple Inc. | AAPL | 23.46% |
| Microsoft Corp. | MSFT | 21.41% |
| NVIDIA Corp. | NVDA | 4.39% |
| Visa Inc. Cl A | V | 3.20% |
| Mastercard Inc. | MA | 2.75% |
| Broadcom Inc. | AVGO | 2.41% |
| Adobe Inc. | ADBE | 2.38% |
| Cisco Systems Inc. | CSCO | 2.35% |
| Accenture PLC Cl A | ACN | 2.31% |
| Salesforce Inc. | CRM | 2.19% |
As of 12/31/2021
FTEC vs XLK: Annual Return
| Funds | Fidelity® MSCI Information Technology Index ETF | Technology Select Sector SPDR® Fund |
|---|---|---|
| 1 month | -7.68% | -6.73% |
| 3 months | -2.42% | +0.56% |
| 6 months | +3.02% | +6.11% |
| 1 year | +21.18% | +26.67% |
| 3 years | +34.23% | +36.23% |
| 5 years | +27.90% | +28.08% |
Which is Better, FTEC or XLK?
With such similarities, there is no clear winner here. Considering that they offer relatively low expense ratios for a technology sector fund, great track records in the past 5-10 years, and less turnover rate, you can’t go wrong with either one.
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