Launched on 01/26/2004, the Vanguard Information Technology ETF (VGT) is a passively managed exchange traded fund designed to provide a 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.
Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Technology – Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 12, placing it in bottom 25%.
The fund is sponsored by Vanguard. It has amassed assets over $40.76 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.
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
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 0.90%.
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 22.98% of total assets, followed by Microsoft Corp. (MSFT) and Nvidia Corp. (NVDA).
Performance and Risk
The ETF has lost about -27.75% so far this year and is down about -16.89% in the last one year (as of 07/06/2022). In that past 52-week period, it has traded between $315.97 and $466.10.
The ETF has a beta of 1.12 and standard deviation of 30.22% for the trailing three-year period, making it a medium risk choice in the space. With about 360 holdings, it effectively diversifies company-specific risk.
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 excellent 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 $8.93 billion in assets, Technology Select Sector SPDR ETF has $38.50 billion. ARKK has an expense ratio of 0.75% and XLK charges 0.10%.
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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.