This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

The Hottest Technology Funds


Proponents of the equal-weight approach argue that the system can outperform because it requires regular rebalancing. Under the system, stocks that soar must be trimmed back to their target weightings. Meanwhile, the fund has to buy more shares of laggards that sink below their target. In effect, the portfolio manager is constantly buying cheap stocks and selling expensive ones, a formula for outperformance. In contrast, funds that rely on market-cap weighting must continually buy more of the hottest stocks.

While the rebalancing may provide a boost over the long-term, the system does not shine every year. The equal-weight fund has lagged SPDR during difficult markets when investors preferred the safety of mega-caps. In the turmoil of 2008, SPDR outpaced the equal-weight fund by four percentage points.

PowerShares S&P SmallCap Information Technology does not hold Apple or any of the other big stocks in the S&P 500. Instead, the ETF owns the technology names from the small-cap S&P 600 index. Many of the little-known names in the small-cap benchmark have been soaring lately. In the past year, the fund returned 33.2%, outpacing the SPDR fund by 20 percentage points.

The small-cap fund has benefited from the improving economy. As investors have become more confident, they have gravitated to smaller technology stocks. The small stocks have seemed particularly appealing because they derive most of their sales in the U.S. In contrast, many mega caps are big exporters. That has been a negative factor at a time when the European economy remains stalled, and investors have begun to worry about the outlook for China and other emerging markets.

First Trust Nasdaq Technology Dividend has an average market capitalization of $55 billion. While the portfolio includes mega-cap dividend payers such as Apple, the fund does not own Google (GOOG), which does not pay a dividend. The dividend fund yields 2.8%, compared to a figure of 1.9% for the SPDR fund.

The First Trust fund could be particularly appealing for income-oriented investors who have emphasized traditional dividend funds such as iShares Dow Jones Select Dividend (DVY). The traditional choices have focused on sectors such as utilities and consumer staples, which have long paid rich dividends. But the dividend funds are typically underweight technology, since many names in the sector have not paid dividends.

By adding the First Trust fund to a dividend portfolio, investors can diversify their holdings. In addition, many technology companies are rapidly increasing their dividends. Such dividend growth could boost the stocks and reward patient investors with growing income.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Stan Luxenberg is a freelance writer specializing in mutual funds and investing. He was executive editor of Individual Investor magazine.
2 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs