The technology sector can be notoriously volatile and treacherous for investors to navigate successfully. Investors are constantly searching for the next long-term growth story. But it can be difficult to cut through the hype and determine whether a promising company is either the next Apple (NSDQ: AAPL) or the next Pets.com, the archetype of the dot-com bubble.

As a result, many investors are better served by finding a sector fund that offers broad diversification and low expenses while capitalizing on major industry trends.

Technology companies have emerged from the Great Recession willing to invest in information technology (IT) even as they remain loath to hire new employees. These investments increase the productivity of a company’s existing workforce and improve operational efficiency.

A recent study by IT consultancy Maven Wave Partners estimates that technology spending surged 14 percent in the first three months of 2011 and rose 6 percent during the second quarter. The research house forecast a 5 percent uptick in IT spending for the third quarter.

Although IT investment softened this year, the robust first-quarter figures reflect pent-up demand following cuts in capital expenditures during the Great Recession. Strong first-half earnings from the likes of Oracle (NSDQ: ORCL) suggest that much of this spending focused on hardware.

Companies are also increasingly allocating portions of their IT budgets toward cloud computing. Cloud computing breaks the traditional computing model by providing software as a service. Instead of dispersing data and applications among individual computers and servers, companies can now use cloud operators to host software applications at a central location and provide access to enterprise users via the Internet for a subscription fee.

This approach offers several advantages that appeal to enterprises. First, Internet-based software limits customers’ need to invest in data storage and server infrastructure. This yields a highly scalable solution that doesn’t require massive capital spending to support new users or applications. Central hosting also ensures that all users within the organization can access the most recent versions of software, relieving IT departments from the time-consuming process of updating programs on each individual computer.

Technology Select Sector SPDR (NYSE: XLK) offers exposure to firms that specialize in cloud computing, as well as a wide range of the IT sector’s other growth stories. The fund’s portfolio includes both niche fare and familiar blue chips such as Apple (NSDQ: AAPL), IBM (NYSE: IBM) and Google (NSDQ: GOOG).

Although the exchange-traded fund (ETF) is heavily concentrated in its top 10 holdings, the portfolio’s 72 additional positions ensure that the fund provides excellent diversification. Additionally, many of the fund’s holdings sport solid balance sheets that enable them to weather economic weakness while maintaining the research and development budgets necessary to foster innovation.

The ETF’s 5 percent annual turnover rate offers tax efficiency, while its low 0.20 percent annual expense ratio makes the fund among the least expensive technology sector ETFs available.