Should You Invest in the Vanguard Information Technology ETF (VGT)? (2024)

Zacks Equity Research

May 15, 2023 at 11:20 AM·3 min read

The Vanguard Information Technology ETF (VGT) was launched on 01/26/2004, and is a passively managed exchange traded fund designed to offer broad exposure to the Technology - Broad segment of the equity market.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Technology - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 13, placing it in bottom 19%.

Index Details

The fund is sponsored by Vanguard. It has amassed assets over $46.20 billion, making it the largest ETF attempting to match the performance of the Technology - Broad segment of the equity market. VGT seeks to match the performance of the MSCI US Investable Market Information Technology 25/50 Index before fees and expenses.

The MSCI US Investable Market Information Technology 25/50 Index is designed to transition in and out of securities affected by pending updates to the information technology sector.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.10%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 0.78%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Information Technology sector--about 89.40% of the portfolio. Financials and Industrials round out the top three.

Looking at individual holdings, Apple Inc. (AAPL) accounts for about 22.31% of total assets, followed by Microsoft Corp. (MSFT) and Nvidia Corp. (NVDA).

Performance and Risk

The ETF has added about 20.95% and is up roughly 15.09% so far this year and in the past one year (as of 05/15/2023), respectively. VGT has traded between $300.84 and $391.03 during this last 52-week period.

The ETF has a beta of 1.16 and standard deviation of 26.40% for the trailing three-year period, making it a medium risk choice in the space. With about 367 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard Information Technology ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VGT is a great option for investors seeking exposure to the Technology ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

IShares U.S. Technology ETF (IYW) tracks Dow Jones U.S. Technology Index and the Technology Select Sector SPDR ETF (XLK) tracks Technology Select Sector Index. IShares U.S. Technology ETF has $10.74 billion in assets, Technology Select Sector SPDR ETF has $43.20 billion. IYW has an expense ratio of 0.39% and XLK charges 0.10%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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