Tech ETFs could be leading ideas for 2022.
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The two tech exchange-traded funds (ETFs) in this article could be leading ideas to consider for 2022.
Businesses in the technology sector are able to grow quickly and achieve good profit margins due to the intangible nature of the service that they typically provide.
These twos could be one to watch:
VanEck Video Gaming and Esports ETF (ASX: ESPO)
This tech ETF owns some of the largest businesses globally that are involved in video game development, eSports and related hardware and software.
These businesses are ones that make a significant portion of their revenue from the video gaming and e-sports industry. The companies involved are benefiting from the increasing popularity of video games, according to VanEck.
E-sports revenue has grown by an average of 28% per year since 2015, whilst video game revenue overall has grown by an average of 12% per year over the same time period.
In mid-December, these are the businesses that have a weighting of more than 4% in the tech ETF: Nvidia, Advanced Micro Devices, Tencent, Nintendo, Netease.com, Roblox, Bandai Namco, Take Two Interactive, Unity Software, Activision Blizzard, Sea, Electronic Arts and Nexon. There are a total of 26 positions in the portfolio.
VanEck also points out that these businesses offer diversification opportunities away from Apple, Amazon, Facebook, Alphabet/Google and Microsoft.
E-sports has opened up a number of new potential revenue streams for the companies involved like game publisher fees, media rights, merchandise, ticket sales and advertising.
Global games revenue is/was predicted to grow from $US100 billion in 2016 to US$200 billion by 2023.
Betashares Asia Technology Tigers ETF (ASX: ASIA)
This ETF is about providing investors with exposure to 50 of the biggest technology businesses outside of Japan.
Since February 2021, the tech ETF has dropped by around 25%. So, prices are quite a bit lower than they were earlier in the year.
Despite recent declines, some of these businesses are among the biggest in the world, such as: Samsung, Taiwan Semiconductor Manufacturing, Tencent, Alibaba, Meituan, Infosys, JD.com, Sea, Pinduoduo and Netease.
The Asian population is seeing a rapid rise in the number of middle class, which allows for more spending on discretionary areas, such as technology and entertainment.
Outlining one of the bullish points about the ETF, BetaShares says that due to its younger, tech-savvy population, Asia is surpassing the West in terms of technological adoption and the sector is anticipated to remain a growth sector.
There are four countries that have significant weightings within the Betashares Asia Technology Tigers ETF portfolio are: China (46.2%), Taiwan (24.6%), South Korea (17.3%) and India (6.6%). So, China features heavily here.
There are various tech sectors within this tech ETF’s portfolio, including: internet and direct marketing (25.9%), semiconductors (20.6%), interactive media and services (17.1%), technology hardware, storage and peripherals (12.9%) and interactive home entertainment (10.1%).
This ETF has an annual management fee of 0.67% per annum.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended BetaShares Asia Technology Tigers ETF and VanEck Vectors ETF Trust – VanEck Vectors Video Gaming and eSports ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.