VGT: A Fund For Technology's Next Big Run
VGT is a solid technology sector fund with a low expense ratio and superior risk-adjusted performance, despite slightly lagging its peers in total return. Technology's recent underperformance is due to overvaluation and crowded positioning, but these issues are fading, making the sector attractive again. I rate VGT a "buy" but suggest waiting for a better entry point around $550, or buying if it breaks the $610 all-time high convincingly.
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Large technology stocks are leading the S&P 500 higher, and that trend is likely to continue thanks to artificial intelligence.
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The Vanguard Information Technology ETF's average annual return was 14%-plus over the past two decades.
Should You Invest in the Vanguard Information Technology ETF (VGT)?
If you're interested in broad exposure to the Technology - Broad segment of the equity market, look no further than the Vanguard Information Technology ETF (VGT), a passively managed exchange traded fund launched on 01/26/2004.
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The Vanguard Information Technology ETF has significantly outperformed the S&P 500 over the past decade, often doubling its long-term returns. It is more concentrated in large tech stocks like Apple, Microsoft, and Nvidia compared to broader market trackers.
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The ETF is quite diversified, holding more than 300 tech stocks. It has a sizable position in three of the "Magnificent Seven" companies.
VGT Is A Stronger Investment Option Than QQQ
VGT offers a competitive investment strategy with a lower expense ratio (10bps) and higher yield (0.65%) compared to QQQ, making it a strong buy for tech sector exposure. VGT's portfolio is highly concentrated, with top holdings Apple, Microsoft, and Nvidia making up 47.08% of the total weight, providing focused tech exposure. Despite concentration risks, VGT performs similarly to QQQ but with lower fees, making it ideal for long-term, buy-and-hold investors.
VGT: Relative Strength Suggests Caution Warranted
The Vanguard Information Technology ETF (VGT) is dominated by Apple, NVIDIA, and Microsoft, which together account for 44% of the ETF. The VGT ETF's recent underperformance relative to the S&P 500 suggests sector rotation is occurring, as investors shift from expensive tech stocks to cheaper sectors. Technology's underperformance is also consistent with late-cycle dynamics, suggesting caution is warranted.
VGT: Insane Concentration Risk
Tech is currently the most overcrowded sector, likely facing a meaningful correction soon, making it a risky allocation right now. Vanguard Information Technology ETF offers broad tech exposure but has high concentration risk in top holdings like Apple, Microsoft, and Nvidia. VGT outperforms peers like XLK due to more diversified holdings and lower fees, but the sector's volatility and concentration risk are significant concerns.
