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Tech Index Breaks Dotcom Era Record: ETFs to Buy

The US technology sector surged past its dotcom era peak owing to improving economic sentiment and earnings outlook. It rose to a 17-year high.

The S&P 500 Information Technology index recorded a ninth-straight high as it closed at 992.29 on July 19, 2017, past its previous high of 988.49 recorded in March 2000.

Although the rise of the internet led to a rally in tech stocks in early 2000, the failure of some of the biggest names in the industry back then ultimately led to a sell-off of 80%.

However, a lot has changed in the last seventeen years. Tech stocks witnessed a rebound and now operate in a completely different environment with totally unique business models.

So, why exactly are tech stocks so expensive and why do some loss-making companies have such high valuations? The answer to this question is simple, convenience.

Internet and the smartphones have become an indispensible part of everyone's lives and it is difficult to imagine life without them. Be it home entertainment, getting essentials delivered at your doorstep or staying connected with the world on the go, consumers demand convenience. The tech sector aims at innovating and focusing on just that.

The tech index has grown around 23% so far this year, led by rallies in major tech companies, compared to the broader market's (SPDR S&P 500 ETF- SPY 10.5% return. For arguments sake, Apple AAPL has increased 30.4% so far this year, while Facebook FB is up around 42.7% and Microsoft MSFT 18.9% this year (read: Is the New FANG-Themed ETF Well Timed? ).

However, the valuations now differ a lot from that of the...