Despite lingering economic malaise, the technology sector has become a beacon of innovation. This week alone, the highly anticipated Google (GOOG) - Get Report smartphone hit the market while consumers gained more information on the expected Apple (AAPL) - Get Report tablet computer. One effective way to participate in the tech sector, while minimizing security-specific risk, is through the appropriate tech ETF.

There are certainly plenty of tech ETFs from which to choose.

Broad-based funds like the

iShares Dow Technology ETF

(IYW) - Get Report

and the

Vanguard Information Technology ETF

(VGT) - Get Report

give investors access to the big names in the American technology sector, like and Google.

More specialized ETFs like the

PowerShares Dynamic Networking ETF

(PXQ) - Get Report

or the iShares

S&P North American Technology-Multimedia Networking Index ETF

(IGN) - Get Report

track narrower segments of the sector.

But one tech fund that stands out from its peers is the

iShares S&P North American Technology Sector Index ETF

(IGM) - Get Report


Launched in 2001, IGM has more than $400 million in net assets and a respectable average daily trading volume of 82,000 shares. IGM tracks the S&P North American Technology Sector Index, which is comprised of 234 holdings, and has an expense ratio of 0.48%. The top five holdings in the fund are currently


(MSFT) - Get Report

, Apple,


(IBM) - Get Report

, Google and


(CSCO) - Get Report


Many of IGM's peers, like IYW and VGT, also share similar top holdings, but it is IGM's balance that makes this fund stand out. For example, IGM, IYW and VGT all have Microsoft as their No. 1 fund holding, with 7.77%, 12.06% and 9.7% allocations, respectively. By limiting its Microsoft exposure to 7.77%, IGM reduces the security-specific risk for MSFT, while still offering increased exposure to this top tech firm.

Looking at portfolio balance in a broader sense, IGM's top 10 holdings make up just 54.75% of the funds total portfolio, while the top 10 holdings of IYW and VGT make up 64.49% and 57.6% of those portfolios, respectively. IGM's large number of components and lower portfolio concentration help to make this fund more balanced.

A broad-based fund like IGM is appropriate for an investor looking to add top tech names to a diversified portfolio. Since the large-cap companies that make up IGM's roster also appear in many other ETFs and mutual funds, it is important that prospective investors examine their existing holdings to avoid unintended overconcentration.

More specialized funds, like PXQ and IGN, are better suited for investors looking for targeted exposure to subsectors of the tech industry. Investors should be careful when handling highly specialized funds, because narrowly focused ETFs have a tendency to lack liquidity. Investors looking to target specific subsectors and quickly trade in and out of them should remember the importance of


in trade execution.

As the U.S. economy continues to recover, tech ETFs are an inexpensive way to gain exposure to an innovative sector with promise. Investors should first asses their objectives, and then begin by examining funds like IGM, which offers both exposure and balance.

At the time of publication, Dion had no positions in securities mentioned.

Don Dion is president and founder of

Dion Money Management

, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.