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

Sector ETF report for VGT

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This story originally appeared on Zacks

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.

- Zacks

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.

Additionally, sector ETFs offer convenient ways 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 8, placing it in top 50%.

Index Details

The fund is sponsored by Vanguard. It has amassed assets over $57.30 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 0.63%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, 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 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 Risk

Year-to-date, the Vanguard Information Technology ETF return is roughly 34.81% so far, and it's up approximately 32.91% over the last 12 months (as of 12/28/2021). VGT has traded between $339.41 and $466.10 in this past 52-week period.

The ETF has a beta of 1.08 and standard deviation of 27.52% for the trailing three-year period, making it a medium risk choice in the space. With about 344 holdings, it effectively diversifies company-specific risk.

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. Because of this, VGT is an outstanding 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.

ARK Innovation ETF (ARKK) tracks N/A and the Technology Select Sector SPDR ETF (XLK) tracks Technology Select Sector Index. ARK Innovation ETF has $16.90 billion in assets, Technology Select Sector SPDR ETF has $53 billion. ARKK has an expense ratio of 0.75% and XLK charges 0.12%.

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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Vanguard Information Technology ETF (VGT): ETF Research Reports

 

Apple Inc. (AAPL): Free Stock 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

 

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