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Should You Invest in the iShares Expanded Tech-Software Sector ETF (IGV)?

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Designed to provide broad exposure to the Technology - Software segment of the equity market, the iShares Expanded Tech-Software Sector ETF (IGV - Free Report) is a passively managed exchange traded fund launched on 07/10/2001.

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 also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Technology - Software is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 6, placing it in top 38%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $6.70 billion, making it one of the largest ETFs attempting to match the performance of the Technology - Software segment of the equity market. IGV seeks to match the performance of the S&P North American Technology-Software Index before fees and expenses.

The S&P North American Expanded Technology Software Index comprises of North American equities in the software industry and select North American equities from interactive home entertainment and interactive media and services industries.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.41%, making it one of the cheaper products in the space.

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 97.20% of the portfolio.

Looking at individual holdings, Adobe Inc (ADBE - Free Report) accounts for about 10.27% of total assets, followed by Salesforce Inc (CRM - Free Report) and Oracle Corp (ORCL - Free Report) .

The top 10 holdings account for about 60.11% of total assets under management.

Performance and Risk

The ETF return is roughly 7.83% and was up about 28.17% so far this year and in the past one year (as of 10/02/2024), respectively. IGV has traded between $65.84 and $89.37 during this last 52-week period.

The ETF has a beta of 1.06 and standard deviation of 27.93% for the trailing three-year period, making it a high risk choice in the space. With about 119 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares Expanded Tech-Software 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, IGV is a great 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.

SPDR S&P Software & Services ETF (XSW - Free Report) tracks S&P Software & Services Select Industry Index and the Invesco AI and Next Gen Software ETF (IGPT - Free Report) tracks STOXX WORLD AC NEXGEN SOFTWARE DEV ID. SPDR S&P Software & Services ETF has $362.32 million in assets, Invesco AI and Next Gen Software ETF has $391.67 million. XSW has an expense ratio of 0.35% and IGPT charges 0.60%.

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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