1 Tech ETF to Buy Hand Over Fist and 1 to Avoid in 2025’s Volatile Market

Tech ETFs are bleeding—or printing. Here's how to tell the difference before your portfolio gets rekt.

The AI Gold Rush Trap

Everyone's piling into AI-focused funds like lemmings chasing the next shiny object. Problem is, half these 'innovative' companies are just OpenAI wrappers with fancy PowerPoints. The hype-to-substance ratio would make a 2017 ICO blush.

The Infrastructure Play That Actually Works

While speculators chase narratives, the real money's in boring infrastructure—cloud security, data centers, semiconductor foundries. These aren't sexy picks, but they're the picks and shovels fueling every tech revolution since dial-up.

Wall Street's Favorite Illusion

Fund managers will sell you diversification while charging 0.75% for the privilege of holding the same ten mega-caps you already own. Genius—paying fees to underperform the index you could've bought for 0.03%.

Bottom line: Buy the engine, avoid the exhaust fumes. Your future self will thank you while everyone else is bag-holding 'the next big thing.' Again.

Image source: Getty Images.

Buy the Invesco QQQ Trust

The tech ETF that investors should scoop up today is the(QQQ -0.43%). It tracks the performance of theindex, which includes the 100 largest non-financial companies that trade on the Nasdaq stock exchange. That makes it a more concentrated investment vehicle than theindex, for example.

A notable 61% of the QQQ's holdings come from the technology sector. The "Magnificent Seven" combine to make up 44% of this ETF's asset allocation. Overall, their share price performances in recent years have definitely had major positive impacts on the QQQ.

Among the powerful secular trends in the economy today are the growth of cloud computing, digital payments, digital advertising, streaming entertainment, and e-commerce. We also can't forget about artificial intelligence, a revolutionary technology that is likely to become more important in our lives. Investors can gain exposure to companies capitalizing on all of these trends and more through the Invesco QQQ Trust.

Its low cost is another key selling point. The Invesco QQQ Trust carries an expense ratio of 0.2%. So on a hypothetical $1,000 investment, Invesco charges just $2 per year in management fees.

The bigger reason to buy this ETF is performance. Over the past five years (as of Aug. 13), the QQQ has delivered a fantastic total return of 120%. That translates to an annualized gain of 17.1%. 

Looking ahead, it's anyone's guess how the Invesco QQQ Trust will perform, but there are reasons to be optimistic. The combination of passive investment flows into large-cap stocks, the dominance of select tech companies, and ongoing currency debasement could help propel this ETF higher.

Avoid the Ark Innovation ETF

By contrast, I think investors WOULD be better off avoiding the(ARKK -1.35%). This actively managed fund is the largest of the ETFs created by Ark Invest, the asset management firm founded and led by Cathie Wood. Its portfolio holds "securities of companies that are relevant to the Fund's investment theme of disruptive innovation."

Wood and Ark Invest get a lot of attention thanks to their bold predictions. But those forecasts don't always pan out. Over the past five years, the Ark Innovation ETF has produced a total return of negative 7%. That's obviously a disappointing track record. And investors in that underperforming fund must pay a hefty expense ratio of 0.75%, nearly four times the cost of the Invesco QQQ Trust.

To be fair, though, this ETF has climbed 79% just in the past year. It's certainly having a moment in the spotlight. However, these kinds of gains aren't likely sustainable. They are a reflection of the fact that the Ark Innovation ETF invests in less-proven and earlier-stage businesses, which makes it much more volatile than a large-cap index fund.

It would be an unwise MOVE for investors to shy away from investing in the technology trends that will continue to shape our economy. But to properly position their portfolios to benefit from those trends over the long term, I believe they'd be better off putting money into the Invesco QQQ Trust and staying away from the Ark Innovation ETF.