Should you invest in the Vanguard Information Technology ETF (VGT)?

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DDesigned to provide broad exposure to technology – a broad segment of the equity market, the Vanguard Information Technology ETF (VGT) is a passively managed exchange-traded fund launched on 01/26/2004.

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

Sector ETFs also give investors access to a broad group of companies in particular sectors that offer low-risk, diversified exposure. Technology – Large is one of 16 major Zacks sectors within the Zacks Industry classification. He is currently ranked 8, which puts him in the top 50%.

Index details

The fund is sponsored by Vanguard. It has amassed assets of over $51.70 billion, making it the largest ETF attempting to match the performance of the Tech-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 comprised of stocks of large, medium and small US companies in the information technology sector.

Costs

Investors should also pay attention to an ETF’s expense ratio. Lower cost products will perform better than higher cost ones, assuming all other metrics remain the same.

The annual operating expense of this ETF is 0.10%, making it one of the cheapest products on the market.

It has a 12-month dividend yield of 0.65%.

Sector exposure and main holdings

Although ETFs provide diversified exposure, which minimizes single-stock risk, a thorough examination of a fund’s holdings is a valuable exercise. And most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has the largest allocation to the information technology sector, approximately 100% of the portfolio.

Looking at individual holdings, Apple Inc. (AAPL) accounts for about 19.68% of total assets, followed by Microsoft Corp. (MSFT) and Nvidia Corp. (NVDA).

Performance and risks

The ETF’s return is around 24.04% so far this year and it has increased by around 38.66% over the past year (as of 10/27/2021). In the last 52-week period, it traded between $297.99 and $429.44.

The ETF has a beta of 1.08 and a standard deviation of 28.18% for the three-year period, making it a medium-risk pick in the space. With approximately 344 holdings, it effectively diversifies company-specific risks.

Alternatives

Vanguard Information Technology ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. For this reason, VGT is a great option for investors who want exposure to the technology ETF segment of the market. There are other additional ETFs in the space that investors might also consider.

ARK Innovation ETF (ARKK) tracks N/A and the Technology Select Sector SPDR ETF (XLK) tracks Technology Select Sector Index. ARK Innovation ETF has $21.75 billion in assets, Technology Select Sector SPDR ETF has $46.90 billion. ARKK has an expense ratio of 0.75% and XLK charges 0.12%.

Conclusion

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

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Vanguard Information Technology ETF (VGT): ETF Research Reports

Apple Inc. (AAPL): Free Inventory Analysis Report

Microsoft Corporation (MSFT): Free Stock Analysis Report

NVIDIA Corporation (NVDA): Free Stock Analysis Report

Technology Select Sector SPDR ETF (XLK): ETF Research Reports

ARK Innovation ETF (ARKK): ETF Research Reports

To read this article on Zacks.com, click here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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