Smartphone manufacturing is booming, and a fund already has been launched that is designed to let investors profit from the trend.

As long-time followers of my ETF Talk features know, I typically do not recommend funds that have average trading volumes of less than 100,000 shares a day. However, I like technology and smartphones, and so I wanted to bring your attention to the First Trust NASDAQ CEA Smartphone Index Fund (FONE).

FONE was designed to help investors gain exposure to companies involved in all aspects of the smartphone value chain, including hardware manufacturers, operating system providers, chip makers, software manufacturers and service providers. The fund seeks investment results that correspond generally to the price and yield, before fees and expenses, of an equity index called the NASDAQ OMX CEA Smartphone IndexSM.

FONE’s top five holdings are Compal Communications Inc, 3.60%; Apple Inc., 3.21%; Sanmina-SCI Corporation, 2.98%; Benchmark Electronics Inc., 2.76%; and Kyocera Corporation, 2.75%. The fund emphasizes manufacturers over service providers, with 90% of the index weight allocated to handsets, software applications and hardware components, and only 10% of the index allocated to service providers. This mix allows investors to profit from the increasing demand for smartphones, without much effect from the marketplace challenges that face service providers.

As you can see from the chart above, FONE only launched in the spring and it still is developing trading volume, so I consider it a bit too young to consider for your portfolio. Plus, since its inception, FONE has fallen well below its opening price of more than $30. I do think that this fund deserves watching, and it may even warrant an investment in the future, especially if the trend toward smartphones accelerates. Keep in mind that already, smartphones are the fastest-growing business segment at Apple, which recently reported selling 18.65 million iPhones in the second quarter. That total marked an increase of 113% compared to the second quarter a year ago, proving that the trend in smartphones continues rising.

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