Best Technology Funds UK – Invest with Zero Fees

With the increasing ability of technology companies to produce superior alpha (excess return over the broad market) came the proliferation of technology funds worldwide that seek to provide investors with the ability to participate in the movement of various technology sectors and sub-sectors.

In this article, we will go over the list of the best technology funds UK, review each one, and in the end suggest top UK brokers which you can use for investing in them.

Best Technology Funds UK List

The technology sector encompasses many different sub-groups, giving the investors plenty of options to choose from, and definitely representing one of the best ways for investing money in high-growing opportunities. In this list we have chosen the best funds for you to consider:

1. Technology Select Sector SPDR Fund – Largest Technology Fund Invest Now
2. Morgan Stanley Institutional Growth Fund – Overall Best Technology Fund Invest Now
3. Fidelity Select Semiconductors Fund – Best Fund to invest in the backbone of new economy- Invest Now
4. First Trust ISE Cloud Computing Index Fund – Best Fund for Cloud Computing
5. Global X FinTech Thematic ETF – Best Fund for Financial Technology Investing
6. T. Rowe Price Science And Technology Fund – Best Fund for Long Term Holding
7. ROBO Global Artificial Intelligence ETF – New and Exciting Name in Technology Funds Town
8. KraneShares CSI China Internet ETF – Best Exposure to Chinese High Flying Internet Names
9. ARK Funds – Most Sought-After Technology Fund
10. Herald Investment Trust – Best UK Oriented Small-Cap Technology Fund

Best Technology Funds to Invest in Reviewed

1. Technology Select Sector SPDR Fund

The $37.4 billion in assets under management, Technology Select Sector SPDR Fund (XLK) clearly shows just how popular this fund is in the investment community. Its focus is on mature and established names of the technology sector and is quite top-heavy with close to 21% off assets invested in both Apple and Microsoft.

XLK Fund chart

Since the fund is U.S.-oriented, larger holdings include companies like Visa, Nvidia, Mastercard, PayPal, Intel, Adobe, and others, and allocates 99.60% to stock with the rest in cash. Such a concentrated approach in turn leads to a stellar performance streak of 68.36%, 27.94%, and 26.10% in the last 1,3 and 5-Year periods.

With only a 0.12% expense ratio it is definitely positioned as one of the most affordable and cheapest options for investors.

2. Morgan Stanley Institutional Growth Fund – Overall Best Technology Fund

The $19.2 billion fund (MSEQX) invests in established and emerging companies predominately in the U.S., but with an option to allocate up to 25% of its total assets in foreign securities. It was able to beat its benchmark for all of one, three, five and 10-Year periods with average annual returns of 115.6%, 42%, 32.2%, and 23.1% and is a perfect option for investors with a longer investment time horizon.

The fund’s biggest sector weight as of the end of last year was information technology, at 35%, communications at 21%, and 15% of assets parked in health care and consumer discretionary each.

MSEQX price chart

The top 10 holdings at the end of the year totaled just over 46% of the 41-stock portfolio. Morgan Stanley Institutional liquidity Treasury was the largest holding with 7.83%, followed by Amazon at about 7.5%, with Square, Shopify, Spotify Technology, and Uber Technologies each around 5% in the rest top five.

3. Fidelity Select Semiconductors Fund

Semiconductors represent the backbone of the entire new-era economy as they are used in everything from making computers, smartphones, transistors, integrated circuits, cars, machines, data centers, and a variety of other consumer and industrial markets.

FSELX price chart

Fidelity Select Semiconductors Fund (FSELX) is one of the oldest (started in 1985) and largest ($5.713 billion in assets under management) funds that seek to capitalize on the rising usage of semiconductors. As it invests in growth-type companies, its turnover rate is more aggressive with a 131% turnover rate last year. However, this was justified as the fund has posted a 1-Year return of 70.47%, while also gaining 29.11%, 34.39%, and 21.23% in the last 3,5 and 10-Year periods.

Among its 38 holdings (as of the end of last year) Nvidia is in a top-weighted position with close to 19% of total assets, followed by Qualcomm, Micron, NXP Semiconductors, and Intel, all between 6-7% weight in the portfolio.

4. First Trust ISE Cloud Computing Index Fund – Best Fund for Cloud Computing

First Trust ISE Cloud Computing Index Fund (SKYY) is the first ETF constructed in a way to offer investors exposure to the cloud computing industry. The fund is very popular and widely used among investors for fine-tuning their portfolio exposure both from a short-term, as well as a long-term time horizon.

SKYY price chart

Individual stock weight is capped at 4.5% of assets, with all stocks coming from one of 3 groups: Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and Software as a Service (SaaS). Currently, its top holdings include companies like Rackspace Technology, VMware, Oracle, Arista Networks, Microsoft, Alphabet, and others.

With an expense ratio of 0.60%, this fund sits in the middle of the category when it comes to cost-efficiency.

5. Global X FinTech Thematic ETF – Best Fund for Financial Technology Investing

This large-cap, financial technology-oriented fund, with its 0.68% expense ratio, provides a good option for investors seeking to profit from the rise shifts that are occurring within the traditional financial industry. Founded in 2016, with close to $1.2 billion in assets under management, Global X FinTech Thematic ETF (FINX) invests heavily in the industry disruptors from both U.S. as well as abroad. Among its top holdings are leading companies in the industry like Square, Paypal, Afterpay, Adyen as well as Warren Buffett-backed Brazilian payment processing company StoneCo.

FINX price chart

Along with these innovative payment companies, tax and accounting-oriented names like Intuit, Bill.com, and Xero Limited are also present at the top of the FINX portfolio. With around 55% of assets allocated to the Top 10 positions, all of which were strong performers in 2020, this ETF rewarded its investors with a healthy 54% gain last year. This represents a fourth straight year of gains after notching 50% in 2017, 1% in 2018, and 38% in 2019.

6. T. Rowe Price Science And Technology Fund – Best Fund for Long Term Holding

By investing in this fund, you are choosing tradition and stability, as both the investment management firm (founded in 1937) and the PRSCX fund itself (1987) have withstood the test of time and proved themselves over and over again as a reliable investment option for investors seeking long-term capital appreciation.

PRSCX price chart

As stated in the fund prospect, at least 80% of capital allocation goes to companies in industries such as electronics, communications, e-commerce, information services, life sciences, media, environmental services, chemicals, synthetic materials, defense, and aerospace. With the track record of 45.80%, 25.50%, 25,20%, and 18,55% in annual total returns for the last one, three, five, and ten year periods, and an expense ratio of acceptable 0.77%, it certainly represents one of the best places to park your money for a long-term investment.

7. ROBO Global Artificial Intelligence ETF – New and Exciting Name in Technology Funds Town

This newly issued ETF is a perfect vehicle for investors looking at fast-growing robotics, AI, and automation companies around the world. Within the 72 holdings in total from 16 countries, the top 5 places are occupied by Chinese technological giant Baidu, iRobot Corporation, Illumina, Etsy and HubSpot. ROBO Global charges 0.68% in annual expense ratio.

THNQ price chart

As the fund came to life in May 2020, it still does not have a longer-term track record or substantial assets under management that investors can rely upon, but it nevertheless represents an exciting prospect as this theme will continue to grow strongly in the next years and decades.

8. KraneShares CSI China Internet ETF – Best Exposure to Chinese High Flying Internet Names

With an 8-year track record under its belt and $4 billion in assets under management, KraneShares CSI China Internet ETF (KWEB) is the only ETF that solely focuses on providing investors with exposure to Chinese high-flying software and IT names.

KWEB price chart

It gives investors the chance to participate in the moves of companies like Tencent, Alibaba, Baidu, Pinduoduo, JD.com, Bilibili, and others, and was able to beat other China-oriented ETFs like SPDR S&P China ETF and iShares MSCI China ETF by a margin of 25% in the last year, on the back of powerful moves that high-growth tech companies had after global Covid-19 pandemic increased the pace the technological changes and adoption.

The tradeoff in the form of a 0.73% expense ratio is quite reasonable considering 66.38%, 25.16%, and 124.30% return on one, three, and five year period.

9. ARK Funds – Most Sought-After Technology Fund

ARK Invest and its founder and CEO Cathie Woods witnessed a meteoric rise in the last several years by offering something completely new to the investing community. It was not only the fact that funds under the ARK umbrella did tremendously well that caught widespread attention; it was also the way how they did it that resonated well especially under the younger generation.

ARKK price chart

ARK is very transparent about its positions and the underlying reasons and assumptions that it makes about every position that it holds or intends to hold. Amazingly, this has not impeded its performance one bit as evidenced by triple-digit returns in all of their actively managed funds last year and close to 550% gain in a 5-Year period for its flagship $24 billion ARK Innovation Fund!

The line of current 7 ETFs (Ark Innovation, ARK Genomic Revolution, ARK Next Generation Internet, ARK Fintech Innovation, ARK Autonomous Technology & Robotics, 3D Printing, and ARK Israel Innovative Technology) will soon be expanded by space-oriented ETF which would track U.S. and global companies involved in space exploration and innovation.

10. Herald Investment Trust – Best UK Oriented Small-Cap Technology Fund

Incorporated in 1993, this £1 billion UK-based fund (LON:HRI) invests primarily in smaller companies from the telecommunications, multi-media, and technology sectors. While the fund has a global investment view, over half of the portfolio (around 53%) is invested in the UK listed companies, and represents a good option for the investor who wants to focus on the UK market, with top holding companies like GB Group PLC, Diploma PLC, Pegasystems, Five 9 and others.

HRI price chart

The fund posted a 1,3 and 5-Year performance of  92.7%, 86.16%, and 207% respectively, and charges 1.74% for its service which is a bit on the higher end of the spectrum.

What can appeal to investors though, is the fact that small-cap companies tend to be under-researched relative to the widely familiar and big-cap names, which increases the chance of pricing inefficiencies and potentially higher gains later on when they get discovered by a wider institutional investors base.

What are Technology Funds?

Technology funds invest in equities of technology companies. They are focused on finding new and emerging technologies that have the potential to significantly disrupt the existing business models. Most of the companies that find their way into these funds operate in the IT-related sectors like hardware, software, digital transformation, cloud computing, data analytics, artificial intelligence and machine learning, and others.

Given that these funds are invested in specific segments of the market, they tend to be more volatile than broad-based market funds or ETFs that track the movement of entire SP500 or NASDAQ indexes.

Why Invest in Technology Funds?

There are two distinct advantages of choosing to invest in a technology fund as opposed to investing in individual companies:

The first and most important advantage is that behind every fund there is a big team of experienced experts (analysts, portfolio, data specialists, and all other supporting role members) whose job is to closely monitor the fund’s portfolio, and spot all potential obstacles and opportunities within the sector. Fund’s managers do all the hard work for you, and you can gain exposure to the best names within the particular investment group, on a cost-effective basis.

The second advantage is that by investing in the fund, you diversify your risk within the group of candidates. By having a lot of companies within the basket (most funds are invested in upward of 20 holdings in the portfolio), you greatly decrease the chance of missing out on some major winners, which is a big possibility if you decide to invest in individual names only, as the rising tide won’t necessarily lift all the boats. Also, a major sell-off in any one individual holding is likely to be muted within the fund, as the other positions would help reduce the drawdown.

The other side of the coin is that, if you are a skillful investor who is able to spot true winners, weed out less impressive companies, and bet big on the strong names, the upside potential can be much higher than when investing in the broad-based fund or ETF.

Depending on your preferences, you can either go with an ETF type investment, in which case you should definitely check out our best technology ETF guide, or you can opt for an actively managed fund if believe that the expense ratio charged by the fund is fully justifiable by its manager’s ability to significantly outperform the market.

Best Technology Funds Brokers

After choosing the right funds to invest in, the next step involves finding the best investment platform for execution. Factors such as fees and commissions, safety, reliability, financial and technical tools, and selection of assets, should all be taken into consideration when making such a decision.

To help you out with this task, we have narrowed down the list to 2  of the most popular and trusted online trading platforms and provided the detailed review below:

1. eToro – Best Overall Platform to Invest in Funds with Zero Commission

eToro is definitely one of the top brokers for UK investors that invest in technology funds.etoro logo This is because the broker is really easy to use, supports a vast range of payment types, and allows you to invest on a commission-free basis, while it also doesn’t charge any ongoing maintenance fees.

As the selection of assets goes, there is hardly any other broker that can match eToro’s offer of almost 250 different ETFs to choose from.

SKYY Fund eToro

67% of retail investors lose money when trading CFDs with this provider.

The minimum investment starts at just $50, so beginning investors don’t need to shell out a fortune to get started. Another amazing feature of this broker is its social trading network which is second to none! Investors can also find good use of its premade portfolio selection feature which groups together top-performing assets within different investing themes.

 

eToro MarketCopy PortfolioseToro is regulated by the FCA, ASIC, and CySEC, and you are covered by the FSCS, meaning that you can be perfectly safe and sound as you will be covered up to £85,000.

Pros

  • Wide variety of ETFs to chose from
  • 100% commission-free trading
  • Ability to copy the trades of other users
  • Built-in social trading network
  • FCA and FSCS protection

Cons

  • Foreign exchange charges
  • Not the best option for traders that perform complex technical analysis

67% of retail investors lose money when trading CFDs with this provider.

2. Libertex – Best CFD Trading Platform to Trade Technology Funds

This trading platform is regulated by the Cyprus Securities and Exchange Commission (CySEC) which ensures the safety and security of your investments.

As it is the CFD broker, Libertex invests in contracts based on an asset’s underlying price movements and not the asset itself, while also giving you the benefit of leverage and short selling, that you won’t find at some conventional share dealing platforms. In other words, you can trade shares with more money than you have in your account.

The ratio of your and borrowed money is capped at 1:5, as per FCA regulations, meaning that a £100 balance would allow you to open a £500 position. However, always be aware that leverage is a double-edged sword so approach it carefully.

libertex etf

Libertex also stands out among other platforms with its policy to not charge any spread, but only a small trading commission on each position.

In terms of payments, Libertex allows you to deposit funds with a debit/credit card, bank wire, or e-wallet, with a minimum deposit of just £10.

Pros:

  • Zero spread CFD trading
  • Good educational resources
  • Long established broker
  • Compatible with MT4
  • Competive spreads

Cons:

  • Small list of available ETFs and funds

83% of retail investors lose money trading CFDs at this site

How to Invest in Technology Funds on eToro Tutorial

After going into details about the investing candidates , we will now turn over the process of opening an account and starting your trading journey on eToro.

Step 1: Open an Account

The first step you need to take is to visit eToro’s website and register for an online trading account. Here you will click on the ‘Join Now’ button on eToro’s homepage and submit your personal such as full name, home address, etc. on the registration form.

eToro registration

67% of retail investors lose money when trading CFDs with this provider.

Since eToro is a regulated broker, the FCA requires it to verify the identity of all account holders. This means that you need to upload a copy of your ID and a proof of address (in a form of a utility bill or bank account statement) before you can make a withdrawal or deposit more than $2,250.

Step 2: Deposit Funds

The minimum deposit investment in eToro stands at  $200, and you can easily make it via any UK debit or credit card. You can also choose an e-wallet option like Paypal or Skrill if it is more convenient for you to do so. If you decide to transfer funds from your UK bank account expect to wait a couple of days.

Note: All eToro deposits attract an FX fee of 0.5%. After this, you can access all UK and international ETFs without needing to worry about fluctuating exchange rates. 

Step 3: Invest in a Fund or ETF

If you know which technology fund or ETF you wish to invest in, type its ticker symbol in the search box and then click on the result that loads up. You can also search the entire ETF list and select any of the 250 options hosted by the platform.

SKYY eToro price chart

Once your chosen investment appears, simply click on the “Trade” option and decide on the amount that you want to invest.

Best Technology Funds UK – Conclusion

The technological sector, in general, continues to be one of the most lucrative areas to invest in. That being said, big profit opportunities also carry big risks, as these stocks tend to be much more volatile than banks, retail stocks, industrials, etc. For investors who lack skills or time to dig deep and discover individual outperformers, but still want to participate in the rise of the sector in general and have some exposure to the leading stocks in the group, with a less volatile ride, investing in tech-oriented mutual funds and ETFs present the best option.

With a zero-fee commission structure, a wide variety of ETFs and funds to choose from, and a valuable social trading platform integrated, eToro represents one of the best brokers that investors can use.

eToro – Buy Technology Funds with Zero Fees

67% of retail investor accounts lose money when trading CFDs with this provider.

FAQs

Why should I invest in Technology Fund?

Technology is now an integral part of everyone’s daily life and it affects almost everything we do. It has the potential to completely change established business models and processes, transforming whole industries and creating brand-new market leaders. This kind of disruptive industry is much more likely to produce big gainers than a traditional, matured industries

Are Technology Companies valued the same way like ones from mature industries?

Technology sector is a difficult area to value, as these high-growth companies often have little in the way of visible earnings or profits until their true potential is actually realized. Focusing on sales increase, improvements in the operational margin, R&D to sales ratio, but also looking at the big picture and having an idea about the potential of the company and the industry as a whole to transform the future is much more important than traditional financial metrics such as P/E, P/S, etc.

Is now the right time to invest in Technology Fund?

The final investment decision should be made by individuals themselves, after completing thorough due diligence., as the time horizons, investing styles and other characteristics greatly differ. That being said, although the technology sector and the technology funds represent one of the best longer-term places where investors can park their capital, they should also be wary about just how far valuations have moved in a short space of time in 2020. The correction that is currently ongoing among high-growth NASDAQ technology names could provide a good place to get in, as the valuations would come back to more reasonable and sustainable levels

Can I combine several funds from this list?

The answer is yes. Even though certain companies will be found in different funds, investors can combine funds in order to gain more concentrated exposure to specific sub-groups/industries, geographical locations or as a macro investing theme.

How do I make money from investing in the fund?

There are several ways how the value of your investment in the fund can grow over time: 1. You will earn income via dividends on stock positions and interest that bonds pay. Almost the entire amount of net income that a mutual fund earns over the year is distributed to its investors. 2. Most funds will also pass capital gains (increase in the price of securities it holds in the portfolio) to its investors 3. You can also profit from selling your shares of the fund if they increase in price from the moment you purchased them, much like you do with the company shares

About Ilija Rajakovic PRO INVESTOR

Ilija Rajakovic is a Serbian-based investor and writer. His main focus areas include finance, trading, and macroeconomy. Ilija holds a Master’s Degree in Investment Banking and is pursuing his Ph.D. with a focus on sustainable finance and development. He is actively managing personal investment portfolios and advising private clients. And has run a website which generated actionable stock market ideas and provided insights into global economic landscape in the past. His economic articles have been publshed in highly respected magazines like NIN and Magazin Biznis.

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