Tuesday, July 5

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


Looking for broad exposure to the Technology – Broad segment of the equity market? You should consider the Vanguard Information Technology ETF (VGT), a passively managed exchange traded fund launched on 01/26/2004.

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

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 11, placing it in bottom 31%.

Index Details

The fund is sponsored by Vanguard. It has amassed assets over $45.49 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 0.80%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund’s holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

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 -19.06% so far this year and is down about -0.19% in the last one year (as of 05/03/2022). In that past 52-week period, it has traded between $351.88 and $466.10.

The ETF has a beta of 1.12 and standard deviation of 29.09% 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.

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 $9.36 billion in assets, Technology Select Sector SPDR ETF has $43.30 billion. ARKK has an expense ratio of 0.75% 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.

Click to get this free report

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

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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