The iShares Expanded Tech-Software Sector ETF (IGV) seeks to track the investment results of the IGM Expanded Tech-Software Index, which measures the performance of U.S. companies primarily engaged in software development, cloud computing, and technology services. This sector-focused equity ETF provides targeted exposure to the software and technology services segment of the broader technology industry.
How It Works
IGV uses a passively managed, market-capitalization-weighted approach that replicates its benchmark index by holding constituent stocks in proportion to their market values. The fund typically holds 100-150 software and technology services companies, with larger firms like Microsoft and Apple receiving higher allocations. Rebalancing occurs quarterly to maintain alignment with index changes and sector classifications. The strategy focuses specifically on pure-play software companies rather than broader technology hardware or semiconductor firms.
Key Features
- Concentrated exposure to high-growth software sector, excluding hardware manufacturers and focusing on recurring revenue business models
- Holdings include cloud computing leaders, enterprise software providers, and software-as-a-service companies with strong competitive moats
- Relatively new ETF launched in 2017, providing access to rapidly evolving software industry trends and digital transformation themes
Risks
- This ETF can lose value when software stocks fall due to rising interest rates, as growth companies are sensitive to discount rate changes
- Sector concentration risk means the fund will decline significantly during technology sell-offs, potentially dropping 40-60% in severe market downturns
- High valuation multiples in software stocks create vulnerability to earnings disappointments or shifts in investor sentiment toward value investing
Who Should Own This
Best suited as a satellite holding (5-15% of equity allocation) for growth-oriented investors with 3+ year time horizons seeking targeted software sector exposure. High risk tolerance required due to technology volatility and sector concentration. Appropriate for investors bullish on digital transformation trends and comfortable with significant short-term price swings.