Is VGT or FTEC the Better Tech ETF? Here's How They Compare on Risk, Returns, and Fees

The Fidelity MSCI Information Technology Index ETF (NYSEMKT:FTEC) and the Vanguard Information Technology ETF (NYSEMKT:VGT) are both passively managed funds that aim to mirror the U.S. information technology sector, with each offering broad, diversified exposure to the industry.

For investors comparing these two, the choice often comes down to cost, size, and subtle differences in holdings and liquidity, rather than differences in sector or performance profiles.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500. The 1-yr return represents total return over the trailing 12 months.

FTEC is very slightly more affordable thanks to its lower expense ratio, while VGT edges ahead on dividend yield, offering a slightly higher payout for income-focused investors.

Performance & risk comparison

What's inside

VGT tracks U.S. tech stocks and, with 322 holdings, is one of the largest sector ETFs by assets under management at $130 billion. It has been in the market for over two decades and spreads its assets across the same sector mix as FTEC: 98% technology, with small allocations to communication services and financials. Its top holdings are Nvidia, Apple, and Microsoft, each making up a relatively significant portion of the fund. There are no leverage, ESG, or other quirky features to note.

FTEC offers nearly identical sector exposure, with 288 holdings and similar weightings to major tech names, led by Nvidia, Apple, and Microsoft. Both funds track broad-based tech benchmarks and lack any unusual structural or trading quirks.

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What this means for investors

FTEC and VGT are virtually identical in most ways. They both track the broader technology industry, with the same top holdings and sector allocations. VGT offers a slightly higher dividend payout, while FTEC boasts a marginally lower expense ratio. Both figures are so similar, however, that most investors won't notice a meaningful difference between the funds in those regards.

Where they do differ, though, is the number of holdings and AUM. VGT is larger on both accounts, with 33 more holdings and a much larger AUM. More holdings increase diversification, while a larger AUM results in greater liquidity -- making it easier for investors to buy and sell without affecting stock price.

Another subtle difference between the two ETFs is the allocation toward top holdings. While the top three positions are identical, VGT is tilted slightly more toward Nvidia, with the stock making up 18.19% of the portfolio compared to 16.61% for FTEC.

Combined, VGT's top three holdings make up 45.41% of total assets, compared to 44.34% for FTEC. It's a subtle difference, but it could result in slightly different returns between the two funds if Nvidia, Apple, or Microsoft over- or underperform going forward.

When it comes to performance, risk level, fees, and dividend yield, VGT and FTEC are almost identical. For investors deciding between the two ETFs, the main differences come down to the number of holdings, AUM, and the slight disparity between top holding allocations.

Glossary

ETF: Exchange-traded fund; a pooled investment that trades on stock exchanges like a single stock.
Expense ratio: The annual fee, as a percentage of assets, that a fund charges investors for management and operations.
Dividend yield: Annual dividends paid by a fund divided by its current share price, shown as a percentage.
Assets under management (AUM): The total market value of all assets managed by a fund.
Beta: A measure of a fund's volatility compared to the overall market, typically the S&P 500.
Max drawdown: The largest percentage drop from a fund's peak value to its lowest point over a specific period.
Sector ETF: An ETF that invests primarily in companies from a specific industry or sector, such as technology.
Passive management: An investment strategy that aims to replicate the performance of a market index rather than outperform it.
Holdings: The individual securities or assets owned within a fund or portfolio.
Liquidity: How easily a fund's shares can be bought or sold without affecting its price.
Benchmark: A standard index used to compare the performance of a fund or investment.
Total return: The investment's price change plus all dividends and distributions, assuming those payouts are reinvested.

Katie Brockman has positions in Vanguard Information Technology ETF. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.