Is Fidelity's FTEC a Better Tech ETF Than State Street's XLK?

The State Street Technology Select Sector SPDR ETF (XLK 1.95%) and Fidelity MSCI Information Technology Index ETF (FTEC 2.14%) both offer low-cost access to U.S. technology stocks, but XLK is much larger and more concentrated, while FTEC holds more companies and slightly increases exposure to the biggest tech names.

Both XLK and FTEC are designed for investors seeking broad coverage of the U.S. technology sector, but they approach this goal somewhat differently. This comparison looks at their costs, performance, risk, portfolio construction, and other characteristics to help investors decide which may better fit their needs.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months.

Both funds are equally affordable at 0.08% in annual expenses, but XLK offers a slightly higher dividend yield. Investors focused on income may prefer XLK, while FTEC’s lower yield reflects its broader, growth-oriented portfolio.

Performance & risk comparison

Over the past five years, XLK has delivered a slightly higher total return and experienced a marginally shallower drawdown than FTEC. Both funds, however, have seen significant volatility typical of the technology sector.

What’s inside

FTEC tracks the MSCI USA IMI Information Technology 25/50 Index and holds 294 stocks, offering exposure across nearly the entire U.S. tech universe. Its largest positions are Nvidia (NVDA 2.17%) at 18.25%, Apple (AAPL 1.45%) at 15.41%, and Microsoft (MSFT 2.44%) at 10.07%, resulting in a portfolio that is even more concentrated in these giants than XLK. The fund has a track record of 12.4 years and no notable quirks or structural overlays.

In contrast, XLK provides targeted exposure to the S&P 500’s technology sector, holding 73 stocks with a sector breakdown of 99% technology. Its top three holdings — Nvidia, Apple, and Microsoft — comprise a combined 38.27% of assets, making it highly concentrated. Both funds lack meaningful exposure to other sectors, but FTEC’s broader roster may appeal to those seeking greater diversification within tech.

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What this means for investors

For investors who want exposure to the hot technology industry, the Fidelity MSCI Information Technology Index ETF (FTEC) and State Street Technology Select Sector SPDR ETF (XLK) are compelling choices.

Both share many similarities, such as their top stocks and low expense ratios. Therefore, choosing between these two comes down to a few key differences.

One is XLK’s larger assets under management, which offers greater liquidity for active traders. Another is FTEC’s 294 holdings compared to XLK’s 73, making the former far more diversified. As a result, FTEC offers exposure to smaller companies with the potential for high growth. But these smaller stocks can be more volatile, contributing to FTEC’s higher beta and max drawdown.

XLK’s holdings in the 73 biggest tech companies and large AUM make it ideal for active traders. Its slightly higher dividend yield is an added bonus, especially for income-focused investors. FTEC is appealing for those who want broader tech exposure, given its holdings are about four times that of XLK.