Ric Edelman's tactic to harness tricky tech sector

Chances are, if you’re involved in the market, you’ve wondered how best to harness advances in tech. Broadly, the Technology SPDR (XLK), an ETF that tracks the technology sector, has gained over 80 percent in five years.

However not all tech is created equally. Before you put money to work top financial planner Ric Edelman, the founder and CEO of Edelman Financial Services, says you need to know about something called “exponential technologies.”

Although that term may sound intimidating, Edelman insists that’s it’s an idea that accessible for everyone. It simply refers to disruptive technology that has a broad impact on many areas of life. “I’m talking about things such as robotics, 3D printing, big data analytics and more,” said Edelman.

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The money pro believes investors who understand these themes, and then leverage them, stand to benefit enormously. As an example, Edelman cited the smartphone trend. “Smartphones didn't exist 7 years ago,” he noted. “Now, can you remember life without it? Would you be willing to live without it? Look how it's disrupted dozens of industries. It’s transformed the camera industry and the music industry thoroughly,” he said.

In addition, the smartphone has sent ripples across companies that make everything from maps and alarm clocks to compasses and even flashlights. “These were once products that people used to buy separately, but no more.” Although individual investors may have been aware of the theme Edelman said they may not have harnessed it simply because they may be reluctant to own single stocks, or they may not be comfortable moving in and out of positions as catalyst evolve.

For those investors, Edelman advocates the iShares Exponential Technologies ETF (XT), which provides exposure to 200 companies globally that are involved in developing and/or using exponential technologies to grow their companies. In the interest of full disclosure, “I am responsible for the creation of this ETF but I have no financial stake in the fund. I merely wanted a fund available for our clients to use as well as investors anywhere,” Edelman said.

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