Buckle Up: The Future of Software Is Poised for Growth and Innovation
The software industry is poised for growth. It's leading the way in cutting-edge technologies like AI, machine learning, and blockchain, opening up exciting opportunities for software companies. Plus, with a projected 25% surge in software development jobs by 2023, as predicted by the US Bureau of Labor, the demand for skilled software engineers is only going up.
Software ETFs vs The Market
The iShares Expanded Tech-Software Sector ETF (IGV) is currently the top software ETF focused on North American software firms and manages a whopping $5.36 billion in assets. With a portfolio of 123 software companies, including heavyweights such as Microsoft (MSFT), Adobe (ADBE), Salesforce (CRM), and Intuit (INTU) as its top holdings, IGV has achieved an impressive 5-year return of 74%. Meanwhile, during the same period, the SPY ETF has yielded a return of 55%.
Niche Software ETFs
For those interested in narrowing their focus within the software industry, there are several software ETFs available to choose from.
🎮 One example is the Wedbush ETFMG Video Game Tech ETF (GAMR), which targets the video game tech industry and is the first ETF of its kind. GAMR currently manages $235M in assets, has had a 28% return over the past 5 years, and has a cost of 0.35% (for comparison, SPY costs 0.0945%).
🔒 Another specialized software ETF is the ETFMG Prime Cyber Security ETF (HACK), which focuses specifically on the cybersecurity industry that is projected to grow from $140B in 2021 to $345B by 2026. It holds 60 positions in its portfolio, including companies like Fortinet (FTNT), VeriSign (VRSN), and Okta (OKTA), and has achieved a 31% return over the past 5 years. HACK has a cost of 0.6%.
☁️ Investors can also consider Share's B2B Software as a Service strategy, which includes ten prominent B2B SaaS companies like DocuSign (DOCU), Cloudflare (NET), and Asana (ASAN). Investing in this themed basket has a few key differences compared to traditional ETFs. Firstly, investors have more control as they can edit the basket by adding or removing stocks. Secondly, investors will own the stocks directly rather than indirectly through an ETF. Lastly, investors can set up to invest as little as $5 per week, making it similar to a themed savings account.