ETFs

ETFs To Play Smartphones

As consumers start to loosen the grip on their wallets and search for a solution to fuel their appetite for innovation, the technology sector is likely to reap the benefits.

The technology sector as a whole is relatively broad based.  Of all the sub-sectors included in the sector, those which are involved, either directly or indirectly, with smartphones will likely benefit the most.  According to a research study, the surge in global demand for phones like the Apple (AAPL) iPhone and the Google (GOOG) Nexus One will soon push sales of smartphones past those of personal computers.  In fact, sales of smartphones as a whole are expected to triple over the next two years, heading towards the billion-unit category.

Some suggest that this surge in demand for these mobile devices is primarily driven by the fact that they offer many of the same benefits and functions of personal computers from the palm of one’s hand.   In fact, most of these phones, such as the iPhone, enable users to download applications, or “apps”, directly to their devices which enable them to do everything from read the latest news published on the New York Times (NYT) to utilize social media by posting new comments on their Facebook pages. 

In fact, Apple’s “app” world has gotten so large that some analysts estimate it constitutes nearly 3% of the company stock value.  Demand for “apps” on Google’s Nexus One is expected to mimic that of Apple’s. 

To further boost the appeal of the sub-sector, demand globally in starting to increase as incomes and purchasing power in developing nations rise and make these technology savvy products more attainable.

Some ways that investors can capitalize on this trend and grab access to both of these companies include:

  • the Technology Select Sector SPDR (XLK), which allocates 8.3% of its assets to Apple and 6.1% to Google.  XLK closed at $22.68 on Wednesday.  XLK also holds AT & T (T), which is the only wireless carrier for the iPhone.
  • the iShares Dow Jones US Technology (IYW), which allocates 9.7% of its assets to Apple and 6.8% to Google.  IYW closed at $57.50 on Wednesday.
  • The PowerShares QQQ (QQQQ), which allocates more than 15% of its assets to Apple and 4.9% to Google.  QQQQ closed at $47.17 on Wednesday.

Although appreciation is likely in these equities, it is equally important to consider the inherent risks they carry.  To help mitigate these risks, the implementation of an exit strategy which triggers price points at which an upward trend could potentially be coming to an end is of importance.

According to the latest data at www.SmartStops.net, an upward trend in the mentioned ETFs could come to an end at the following price points: XLK at $21.78; IYW at $55.13; QQQQ at $45.28.  These price points change on a daily basis as market conditions fluctuate and updated data can be found at www.SmartStops.net.

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