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Finding the Right Technology Product

by | Tips & Strategies

The technology sector is up 400% in the last decade, and, while there’s no telling where tech stocks go from here, it’s evident that they are some of the most prominent names in the market. In 2010, Exxon (XOM) was the S&P 500’s largest component, and Apple (AAPL) and Microsoft (MSFT) were the only technology stocks in its top five. Today, the index’s top five is all tech, and there isn’t an energy company in its top thirty names.

Source: dxFeed Index Services (https://indexit.dxfeed.com)

Overweight Tech Products

Major equity indexes such as the S&P 500 and Nasdaq are now heavily invested in the technology sector, 24% and 45% weightings respectively, and their futures (/ES, /NQ) and ETFs (SPY, QQQ) reflect this. Almost all of that tech exposure, however, is concentrated in just a few names. For instance, AAPL and MSFT make up 12% of the S&P and thus half of its technology sector weighting, and these same two names account for 24% of the Nasdaq.

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Traditional sector-specific products like the exchange-traded fund XLK (43% AAPL and MSFT) run into the same problem of heaviness at the top. Burgeoning companies in biotechnology and the more technological fields of media and retail are often underrepresented due to their market capitalization. If technological advancements infatuate the everyday investor now more than ever, then why are they stuck with antiquated products that only really track a handful of companies?

Source: dxFeed Index Services (https://indexit.dxfeed.com)

A Future for Technology Trading

Small Technology 60 (/STIX) updates tech for the modern trader looking for a single market that puts rising companies like Regeneron (REGN) and Shopify (SHOP) shoulder-to-shoulder with Apple and Microsoft. Investors can get more diversified technology that’s split into four subsectors: information, retail, media, and biotechnology. And speculators get a more active trade that’s not merely the result of sentiment in a couple names.

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Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

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