3 High-Performing Tech ETFs to Diversify Your Portfolio

March 2025 has brought a challenging phase for the U.S. stock market, particularly affecting the technology sector. What started as a promising year quickly transformed into a period of significant selling pressure caused by trade uncertainties, waning excitement about artificial intelligence, and skepticism around high valuations.

The visible decline in the Nasdaq highlights this trend. Even renowned tech companies, often referred to as the Magnificent Seven, are facing difficulties as investors reassess their growth outlook.

Choosing individual tech stocks in such a volatile market can be risky and complex. This is where technology-focused ETFs shine, offering a more diversified investment option that balances growth potential with risk management.

3 Tech ETFs for a Diversified Technology Play

Let’s explore three prominent technology ETFs that provide extensive exposure to the tech landscape while blending growth opportunities with diversification. These options are especially attractive during the current turbulence in the sector.

A Leading Technology ETF: The QQQ

The Invesco QQQ Trust (NASDAQ: QQQ) is a well-known tech-focused ETF that tracks the Nasdaq-100 Index, which includes the 100 largest non-financial companies listed on the Nasdaq.

Invesco QQQ Today

$468.94 -12.68 (-2.63%)

As of 03/28/2025 04:00 PM Eastern

52-Week Range

$413.07

▼

$540.81

Dividend Yield

0.64%

Assets Under Management

$305.49 billion

While it isn’t solely a tech fund, nearly 50% of QQQ’s portfolio is invested in the technology sector, making it a top choice for investors looking to gain access to major American tech firms. The top investments, including companies like Broadcom and Netflix, dominate the portfolio, with a few names making up a significant portion.

With approximately $304 billion in assets under management, QQQ offers solid liquidity and has an average daily trading volume that surpasses 34 million shares. Its expense ratio is a manageable 0.20%, and it provides a modest dividend yield of 0.62%. Despite a drop of about 6% so far in 2025 and nearly 11% from its 52-week peak, QQQ still boasts an impressive long-term performance record.

The Vanguard Information Technology ETF

The Vanguard Information Technology ETF (NYSEARCA: VGT) takes a focused approach by tracking the MSCI US Investable Market Information Technology 25/50 Index, concentrating exclusively on the U.S. tech sector. With $78 billion in assets under management, VGT encompasses over 300 holdings, from large companies to smaller ones, providing a more detailed view of the tech market.

Vanguard Information Technology ETF Today

VGT

Vanguard Information Technology ETF

$543.24 -14.00 (-2.51%)

As of 03/28/2025 04:10 PM Eastern

52-Week Range

$478.25

▼

$648.76

Dividend Yield

0.68%

Assets Under Management

$77.52 billion

Its leading holdings include major names such as Apple (16.8%), NVIDIA (13.9%), and Microsoft (13.3%), focusing mainly on hardware, software, semiconductors, and IT services without crossing into other sectors.

The ETF’s low expense ratio of 0.10% highlights Vanguard’s commitment to low costs, and it features a dividend yield of 0.67%. This year, VGT has also encountered selling pressure, with declines surpassing 10% year-to-date and over 14% from its 52-week highs. However, it has managed to outperform some individual stocks, such as NVIDIA, which has seen a 17% drop. By including mid-cap stocks, it adds a potential growth element, making it an appealing option for those interested in upcoming innovations. For investors seeking a tech-oriented ETF with low expenses and broad coverage, VGT stands out.

The XLK: Focusing on S&P 500 Technology Stocks

The Technology Select Sector SPDR Fund (NYSEARCA: XLK) offers a concise approach to technology investments by tracking the Technology Select Sector Index, a component of the S&P 500. With $66 billion in assets under management, XLK holds over 70 large-cap stocks, providing a more concentrated investment than VGT.

Technology Select Sector SPDR Fund Today

XLK

Technology Select Sector SPDR Fund

$206.38 -5.13 (-2.43%)

As of 03/28/2025 04:10 PM Eastern

52-Week Range

$190.75

▼

$243.14

Dividend Yield

0.74%

Assets Under Management

$65.75 billion

Similar to QQQ, XLK’s biggest holdings include Apple (14.4%), NVIDIA (12.9%), and Microsoft (12.8%), collectively accounting for more than a third of the fund. This concentration can increase exposure to both the successes and risks associated with these leading tech companies.

With an expense ratio of 0.09%, XLK offers a slightly lower cost than VGT, yielding a dividend of 0.72%. However, it has seen a steeper decline this year, approximately 9% so far, showcasing its dependency on a few major companies amid market uncertainties. On a positive note, it has demonstrated a strong long-term performance, with annualized returns averaging above 19% over the past decade.

XLK is suitable for investors looking for a concentrated investment in tech giants, benefiting from the quality filter of the S&P 500 that adds stability. It’s less about breadth and more about focusing on leading firms to weather market fluctuations.

Conclusion

In today’s unpredictable market, considering technology ETFs can be a prudent strategy over selecting individual stocks, offering a blend of diversification and growth potential while managing risk effectively.

ETF, Investing, Technology