WAAAX or FAANG? Which ASX tech shares to buy in 2020

Why US and ASX tech shares are hot right now and how to buy these top growth shares for the year ahead.

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Tech shares. They're hot right now and continue to climb.

Whether its Afterpay Ltd (ASX: APT) surging in Australia or Amazon.com Inc. (NASDAQ: AMZN) in the United States, global technology investors are having a field day.

However, investors have to be careful in such a high-growth area. While the WAAAX ASX tech shares have outperformed recently, there is a lot of future expected growth being priced in.

As we approach the August earnings season, let's take a look at the pros and cons of investing in WAAAX or FAANG shares.

Should you buy tech shares right now?

Investors often choose ASX dividend shares for their consistent payouts versus uncertain future capital growth. However, 2020 (and the coronavirus pandemic) has moved the goalposts, so to speak.

That means now could be a good time to invest in ASX tech shares.

Despite already lofty valuations, the Afterpay share price has continued to climb. It's a similar story for other WAAAX shares like Xero Limited (ASX: XRO) and Altium Limited (ASX: ALU).

There is a lot of cheap money looking for a good home right now and that's driving up demand for shares right across the market.

However, we're still seeing strong operational and financial growth numbers from these companies, which is good news for shareholders who have bought and held.

It's not just happening in Australia, either. We've seen the Amazon share price storm higher while the Apple Inc. (NASDAQ: AAPL) share price is up 26.3% this year.

Many investors smarter and with more knowledge than myself think buying tech shares is a good idea right now. If that's the case, what's the best way to do it on the ASX?

How to invest in ASX tech shares today

The most obvious way is to invest directly in ASX tech shares. That means simply buying Afterpay or Xero shares through a broker and taking a direct ownership stake.

That's the best way to get pure exposure to the company of your choice. You can also look at exchange-traded funds (ETFs) for lower costs and more diversification.

For ASX tech shares, you might want to look at BetaShares S&P/ASX Australian Technology ETF (ASX: ATEC). That aims to track the S&P ASX All Technology Index (ASX: XTX) and invests in top tech shares like Afterpay and Xero.

For international exposure, the ETFS FANG+ ETF (ASX: FANG) may fit the bill. The ASX tech ETF's top holdings include top US tech stocks like Amazon, Apple and Tesla Inc (NASDAQ: TSLA).

Foolish takeaway

No one knows whether now is a good time to buy tech shares. In hindsight, mid-March was a great time to buy but so too was 2009.

If you're bullish on tech and a long-term investor, the short-term price fluctuations shouldn't cloud your judgement on the power of long-term returns.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Altium, Amazon, Apple, and Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Xero and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool Australia has recommended Amazon and Apple. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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