It's not too late for investors to ride the tech boom


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Technology stocks have staged a rebound this year in US markets and elsewhere around the globe.

It's not too late for investors to ride the tech boom as growth will inevitably continue, driven by the digital evolution of economies, businesses and every facet of our lives.

Technology sectors in Australia, the US, Europe, China and elsewhere in Asia have rallied hard in recent weeks. Many stocks have reached all-time highs, at least on the Australian Securities Exchange (ASX).

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The good news for investors is that ETFs (exchange traded funds) can you give you easy access to a diversified portfolio of technology shares, including in the US giants and Australia's fastest growing technology players.

Companies like Afterpay Touch Group, Wisetech and Appen have attracted the spotlight for their innovative businesses, exporting their services globally and reaping very strong returns. These companies were up 184%, 107% and 69% respectively over this calendar year to 1 October, compared to 19% for the S&P/ASX 200.

Returns for US technology shares have also been strong.

The technology heavy NASDAQ Index is up 21% over the year to 1 October, compared to 19% for the S&P 500. Facebook has jumped 35.9%, Apple has gained 42% and Microsoft grew 37%, while Google owner Alphabet is up 17%.

These are products and services which have become engrained in our day-to-day life, generating billions of dollars in revenues in the process.

This is a key difference between technology stocks today compared to 20 years ago when the sector was largely characterised by internet start-ups.

Of course, high returns doesn't alleviate risk.

Tech companies have to deal with other particular risks - their businesses can quickly become redundant with the rapid advancement of technology, what's leading the market one day can be outdated the next.

Other tech companies simply struggle to maintain significant profits, irrespective of their market share. This includes the global ride-sharing giant Uber, as well as social media platforms Twitter and Snapchat.

Nevertheless, as a whole, technology returns stand out, both in Australia and offshore.

China is also emerging as a global technology leader and the sector is growing rapidly, backed by a huge level of government support. China A-shares, which are those shares listed on mainland China's two main stock exchanges based in Shanghai and Shenzhen, are a hidden kingdom of technology investment opportunities.

Outside of China A-Shares, conglomerates such as Alibaba and Tencent, which are listed on the New York Stock Exchange and Honk Kong Stock Exchange respectively, highlight the global might of Chinese technology companies.

ETFs have made it easy to access both local technology companies and offshore giants with just a single trade on ASX.

There are several ASX-listed ETFs providing investors with technology sector exposure. (The VanEck Vectors MSCI World ex Australia Quality ETF has around a 34% exposure to US technology stocks, and counts Apple, Microsoft, Facebook and Alphabet as its largest holdings.)

There are also ETFs which provide country-specific, equal weight or factor-specific exposure to the technology sector. The VanEck Vectors China New Economy ETF gives investors a portfolio of the most fundamentally sound companies in China having the best growth prospects in sectors making up 'the New Economy', namely technology, health care, consumer staples and consumer discretionary.

Investors should speak to their financial adviser or stockbroker and read the relevant product disclosure statement before investing in offshore markets and the technology sector.

But it goes without saying that you have to be in it, to win it, and that is very true of getting exposure to the technology sector, which has offered investors some very attractive returns.

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Arian Neiron is managing director and head of Asia Pacific at VanEck. Prior to joining VanEck, Arian was a partner at boutique asset management advisory firm Sunstone Partners and was previously at Perpetual Investments, Credit Suisse and MLC.

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