Better Tech ETF for 2027: State Street's XLK vs. Fidelity's FTEC

Investors searching for tech sector exposure can consider two ETFs: the State Street Technology Select Sector SPDR ETF (XLK) and the Fidelity MSCI Information Technology Index ETF (FTEC). Both funds share low expense ratios, betas, and dividend yields, making them cost-effective options. However, they differ significantly in their portfolio construction and AUMs, resulting in distinct investment outcomes.

XLK is anchored by the largest and most established tech companies in the S&P 500, delivering ultra-low-cost exposure through a 100% tech portfolio of 76 stocks. Its largest holdings include Apple, Nvidia, and Microsoft, with over $120 billion in assets under management. The fund launched in 1998 and offers a modest 0.5% trailing-12-month yield.

In contrast, FTEC provides broader market participation by tracking the MSCI Information Technology Index, encompassing 294 holdings across the technology sector. With a higher AUM of $20.8 billion, FTEC offers greater liquidity and diversification, reducing exposure to individual stock risks. Its portfolio includes Apple, Nvidia, and Microsoft, but also includes smaller-cap companies for total-market breadth. The fund, established in 2013, has paid a higher 0.4% trailing-12-month yield.

In conclusion, the choice between XLK and FTEC hinges on an investor's priorities. If you seek liquidity and alignment with the largest tech companies, XLK is the better choice. However, if you prioritize broad exposure to the technology sector and the potential upside of mid- and small-cap stocks, FTEC is the recommended option.