ETF Talk: Technology Goes Global

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

Countries in Asia and Europe are joining the United States as drivers of technology innovation. Indeed, technology advances can come from developed and developing countries alike. For that reason, I want to bring to your attention a globally focused technology exchange-traded fund (ETF), the SPDR S&P International Technology Sector (IPK). The fund tracks non-U.S. technology companies.

If you want to invest in innovation taking place outside of the United States, IPK is worth considering. This non-diversified fund seeks investment results which, before fees and expenses, correspond generally to an index that tracks the technology sector in non-U.S. developed global markets.

While IPK has traded mostly flat this year, it had tremendous price gains in 2012 of more than 20%. And this ETF now offers a quarterly dividend, which results in a 1.20% yield. Asia and Europe both also are heavy users of technology, and China is moving in the same direction with its huge population. The Middle East, particularly economic engines such as Dubai, is increasing its use of technology and individual technological devices, too. The chart below offers a snapshot of IPK.

Most of IPK’s holdings, 85.94%, are in the technology sector, which is what you would expect from a technology ETF. The fund’s remaining holdings reside in sectors which play a supporting role, with a decently sized investment in industrials, 10.79%, and small allocations to consumer cyclical, 2.19%; communication services, 0.95%; and utilities, 0.14%. Among the fund’s individually held companies, not many are traded on U.S. exchanges, reflecting this fund’s focus on global technology companies. IPK’s top ten companies make up 48.93% of its total assets, and the lion’s share, 19.06%, of IPK’s total assets, is invested in Samsung. The remaining members of IPK’s top five companies held are SAP, 7.94%; Cannon Inc., 4.86%; Ericsson, 4.26%; and Hitachi, Ltd., 2.67%.

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Although now may not be a great time to jump into IPK, as technology shares traditionally take a dip heading into the summer months, it is a good idea to keep an eye on this fund to educate yourself on the status of the sector outside the United States and potentially to invest when the fund resumes its rise. If you have a longer-term perspective, IPK could be part of your investment future.

Meanwhile, if you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to email me by clicking here. You may see your question answered in a future ETF Talk.

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