Should You Invest in the iShares Expanded Tech Sector ETF (IGM)?

Launched on 03/13/2001, the iShares Expanded Tech Sector ETF (IGM) is a passively managed exchange traded fund designed to provide a broad exposure to the Technology – Broad segment of the equity market.

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

Sector ETFs are also funds of convenience, offering many ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Technology – Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 5, placing it in top 31%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $2.47 billion, making it one of the larger ETFs attempting to match the performance of the Technology – Broad segment of the equity market. IGM seeks to match the performance of the S&P North American Technology Sector Index before fees and expenses.

The S&P North American Expanded Technology Sector Index comprises of North American equities in the technology sector and select North American equities from communication services to consumer discretionary sectors.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF’s expense ratio.

Annual operating expenses for this ETF are 0.40%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 0.48%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Information Technology sector–about 75.30% of the portfolio. Telecom and Consumer Discretionary round out the top three.

Looking at individual holdings, Microsoft Corp (MSFT) accounts for about 8.21% of total assets, followed by Amazon Com Inc (AMZN) and Apple Inc (AAPL).

The top 10 holdings account for about 8.21% of total assets under management.

Performance and Risk

Year-to-date, the iShares Expanded Tech Sector ETF return is roughly 9.74% so far, and is down about -17.27% over the last 12 months (as of 01/26/2023). IGM has traded between $266.47 and $404.12 in this past 52-week period.

The ETF has a beta of 1.15 and standard deviation of 31.80% for the trailing three-year period, making it a medium risk choice in the space. With about 334 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Expanded Tech Sector ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, IGM is an excellent option for investors seeking exposure to the Technology ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

Technology Select Sector SPDR ETF (XLK) tracks Technology Select Sector Index and the Vanguard Information Technology ETF (VGT) tracks MSCI US Investable Market Information Technology 25/50 Index. Technology Select Sector SPDR ETF has $40.21 billion in assets, Vanguard Information Technology ETF has $42.56 billion. XLK has an expense ratio of 0.10% and VGT charges 0.10%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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