Vanguard Information Technology ETF (VGT) Analysis: Price History, Holdings, & Forecast

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Updated: 14th Oct 2021
Written by Sean Graytok
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Investing
October 14, 2021
Written by Sean Graytok

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The Vanguard Information Technology ETF (VGT) is one of the best ways to get exposure to technology stocks, but it’s not perfect.

Here’s everything you need to know about VGT before investing in it.

What is the Vanguard Information Technology ETF (VGT)?

The Vanguard Information Technology ETF seeks to track a benchmark of stocks in the information technology sector.

VGT is a passively managed exchange-traded fund composed of companies that serve the electronics and computer industries or manufacture products based on the latest applied science.

This is your best tech-heavy growth play amongst Vanguard funds, except for Vanguard’s Mega Cap ETF (MGC).

Understanding VGT

Around 40% of the Vanguard Information Technology ETF is invested in Apple (AAPL), and Microsoft (MSFT) stock, so less than 1% of the holdings make up nearly half the fund.

Worst case scenario, these multi-trillion dollar companies will serve as ballast for VGT in the coming years.

In the best case scenario, Apple and Microsoft continue to grow and further dominate their respective markets. It’s not unreasonable to think that Apple and Microsoft can become $4 trillion companies.

AAPL and MSFT aren’t going to 10x from here, but they’re also not going to zero anytime soon.

While Apple and Microsoft provide stability, the remaining 355 stocks are free to swing and miss — some will generate alpha, and some will get clobbered.

Understanding VGT’s construction can help you decide if the ETF aligns with the goals of your larger portfolio.

>> More: What Are The Best Stocks To Buy?

Advantages of VGT

VGT is a low-cost investment vehicle that provides exposure to stable technology companies.

The fund’s diversification across 357 stocks can help lower the overall risk in your portfolio.

For example, if Apple stock struggled for a few quarters, the remaining 80% of the fund could provide some support.

VGT’s holdings consist of blue-chip, legacy technology companies with proven business models.

None of these stocks will 10x from here, but we expect them to grow at a healthy rate for many years to come.

We believe that VGT is for investors interested in growth stocks but maybe not so interested in the high-flying valuations of the ‘disruptor’ class of technology stocks, such as Shopify (SHOP), Square (SQ), or Palantir (PLTR)

Additionally, VGT is better than its mutual fund counterpart, the Vanguard Information Technology Index Fund Admiral Shares (VITAX).

This mutual fund requires a minimum investment of $100,000, while VGT does not require a minimal investment.

Additionally, VGT has better liquidity and is more tax-efficient than VITAX.

Disadvantages of VGT

Depending on your investment goals and time horizon, you may view some of the above ‘advantages’ as ‘disadvantages.’

For example, you might be interested in more risky technology stocks if you have a multi-decade time horizon.

Yes, VGT is a ‘tech ETF,’ but it might not be the tech stocks you’re after.

Perhaps a better alternative for investors seeking more upside — and willing to take on the associated risk — is the Invesco QQQ ETF that tracks the top 100 companies in the Nasdaq Composite Index.

QQQ contains stocks like Amazon, Netflix, Tesla, Moderna, Starbucks, Broadcom, and Qualcomm. As you can see, a variety of tech-enabled companies beyond the technology hardware and software sectors of VGT.

>> More: Best Nasdaq ETFs

VGT Fund Details

Here is a quick snapshot of the VGT ETF:

  • Performance over 1-Year: +23%
  • Expense Ratio: 0.10%
  • Assets Under Management (AUM): $59 billion
  • Number of Holdings: 357
  • Median Market Cap: $279 billion

Below, we included an industry breakdown of VGT stocks to show the variety of sub-sectors it covers:

  • Technology Hardware: 21.0%
  • Systems Software: 20.9%
  • Semiconductors: 16.3%
  • Application Software: 13.7%
  • Data Processing & Outsourced Services: 13.5%
  • IT Consulting & Other Services: 3.6%
  • Semiconductor Equipment: 3.4%
  • Communications Equipment 2.9%
  • Internet Services & Infrastructure 1.6%
  • Electronic Equipment & Instruments 1.2%
  • Electronic Components 0.8%
  • Other 1.1%

As you can see, you’re getting a bit of everything with this fund.

VGT Top 10 Holdings

It’s important to be familiar with VGT’s top ten holdings because over 57% of the fund is allocated to them. Here are VGT’s primary holdings:

  • Apple (AAPL) 20.0%
  • Microsoft (MSFT) 17.0%
  • Nvidia (NVDA) 4.4%
  • Visa (V) 2.9%
  • PayPal (PYPL) 2.5%
  • Adobe (ADBE) 2.5%
  • Mastercard (MA) 2.4%
  • Salesforce (CRM) 2.0%
  • Cisco (CSCO) 2.0%
  • Intel (INTC) 1.7%

Over 81% of holdings in VGT are large-cap stocks. They are established winners in their space, which also puts a target on their back.

>> More: Join The Motley Fool Stock Advisor & see their top 10 stocks to buy right now.

VGT Price & Historic Performance

As of this writing, VGT trades around $400 per share. Let’s look at VGT’s performance over the last year.

VGT Fund

Zooming out even further, here’s VGT’s performance over the last five years:

VGT Stock Analysis

You’re probably a long-term investor if you’re looking into Vanguard exchange-traded funds.

The past isn’t indicative of the future, but with long enough time horizons, you can probably expect up-and-to-the-right price movements with VGT.

VGT ETF: Frequently Asked Questions

Is VGT ETF better than QQQ ETF?

We believe that QQQ is better than VGT because it has a more progressive definition of ‘technology stocks.’ QQQ captures FAAMG far better than VGT.

Does VGT have a minimum investment?

VGT does not have a minimum investment, which is a prominent advantage of ETFs compared to mutual funds. The VGT equivalent for mutual funds is VITAX, which requires a $100,000 minimum.

What is VGT’s expense ratio?

Vanguard offers notoriously low expense ratios, and VGT is no exception at 0.10%. This means you’ll pay Vanguard $1 for every $1,000 you invest in VGT.

What companies are under VGT?

There are 357 companies in VGT that operate in the technology sector. However, nearly 40% of the ETF consists of Apple and Microsoft stock alone.

Bottom Line: Vanguard Information Technology ETF

The Vanguard Information Technology ETF is an efficient way to get exposure to the technology sector.

It’s one of Vanguard’s best-performing funds and will likely be a winner moving forward.

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This article is for informational purposes only. It is not intended to be investment advice.

Sean Graytok
Sean Graytok
Sean is a student of the financial and technology industry. He is interested in the people and companies who are driving the innovation that will change our future.