Own VGT? Here's How Much of It Is Really Nvidia, Apple, Microsoft, and Broadcom.
Key Points
The Vanguard Information Technology ETF (VGT) has delivered impressive annualized returns of 24.7% for the past 10 years, outperforming the high-flying Nasdaq-100 index.
VGT does not own certain well-known tech names because of their sector classification.
Nvidia, Apple, Microsoft, and Broadcom are four of the five largest holdings in VGT, making up about 49% of the fund’s assets.
- Motley Fool Issues Rare "Total Conviction" Buy Alert ›
When investing in tech exchange-traded funds (ETFs), sometimes it's a good idea to peek under the hood and see what you're really buying within each fund's portfolio. Sometimes there is a lot of overlap from one tech ETF to another. This can make it easier to choose the best tech ETF for your goals, based on which fund holds which mix of stocks and sectors.
The Vanguard Information Technology ETF (NYSEMKT: VGT) is a popular tech fund that holds 318 stocks. It represents a wide range of companies in the electronics and computer industries, including semiconductors, software, hardware, and tech-related services and components. And VGT is a passive index fund, so it doesn't pick stocks -- it just tracks the performance of its tech sector benchmark.
Missed AI’s "Act 1"? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we’re only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue »
When you buy VGT, you're going to get a strong concentration of major tech names that are also top holdings in the S&P 500 index (SNPINDEX: ^GSPC) and Nasdaq-100 index. But how much of VGT is just a few major tech stocks that you can buy in other ETFs?
A large percentage of assets of the Vanguard Information Technology ETF is made up of only four big-name tech tickers: Nvidia (NASDAQ: NVDA), Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), and Broadcom (NASDAQ: AVGO). As of Sept. 30, those four stocks represented about 49% of the VGT fund's assets.
If you feel like VGT is getting too top-heavy with just these four tech names, or you want to own a different mix of stocks, this could affect your investment choices. Let's take a closer look at VGT and its concentration of tech majors NVDA, AAPL, MSFT, and AVGO.
Image source: Getty Images.
Vanguard Information Technology ETF (VGT): 22 years of 15% annualized returns
The Vanguard Information Technology ETF has delivered strong returns for investors, with average annual returns of 15.03% since the fund's inception in January 2004. It's done even better in the past few years, with about 24.7% annualized returns in the past 10 years, 20.9% in the past five years, 35% in the past three years, and about 35.2% in the past year.
Unlike many popular tech ETFs, VGT is somewhat unique for some of the well-known "Magnificent Seven" tech stocks that it does not own. For example, the VGT fund does not hold Alphabet, Amazon, Meta Platforms, or Tesla. That's because although these companies are frequently described as "tech stocks," they are not technically part of the information technology sector as defined by the MSCI US IMI Information Technology 25/50 Index, which is the benchmark that VGT follows.
But the mix of growth stocks in VGT has been pretty successful. VGT has strongly outperformed the Nasdaq-100 during the past 10 years.
VGT Total Return Level data by YCharts
VGT: Concentration of NVDA, AAPL, MSFT, and AVGO (49% of the fund)
The U.S. stock market has become top-heavy with tech stocks in recent years due to major gains from the artificial intelligence (AI) boom. The Vanguard Information Technology ETF is no exception to that trend. But if you're concerned about making too concentrated an investment in just four stocks, this could be worth paying attention to.
Let's look at the top holdings and weights of VGT and see how they compare to typical S&P 500 and Nasdaq-100 index funds.
|
Stock ETF: |
Vanguard Information Technology ETF (VGT) |
Vanguard S&P 500 ETF (VOO) |
Invesco Nasdaq-100 ETF (QQQM) |
|---|---|---|---|
|
Top 10 stock holdings by weight (% of fund) |
1. Nvidia: 17.6% 2. Apple: 15.9% 3. Microsoft: 11.2% 4. Micron: 4.45% 5. Broadcom: 4.1% 6. Advanced Micro Devices: 3.7% 7. Intel: 1.98% 8. Cisco: 1.6% 9. Lam Research Group: 1.55% 10. Palantir: 1.55% (as of Sept. 30) |
1. Nvidia: 8.4% 2. Apple: 7.4% 3. Microsoft: 5.8% 4. Alphabet: 5.5% (Class A and Class C shares, combined) 5. Amazon: 3.7% 6. Broadcom: 2.5% 7. Meta Platforms: 2.4% 8. Micron: 1.8% 9. Tesla: 1.5% 10. Advanced Micro Devices: 1.5% (as of Sept. 30) |
1. Nvidia: 8.2% 2. Apple: 7.7% 3. Microsoft: 6.10% 4. Alphabet: 6.06 (Class A and Class C shares, combined) 5. Micron: 4.4% 6. Amazon: 4.2% 7. Advanced Micro Devices: 3.96% 8. Meta Platforms: 3.4% 9. Tesla: 2.97% 10. Space Exploration Technologies: 2.8% 11. Broadcom: 2.54% (as of Oct. 14) |
|
Combined weight of NVDA, AAPL, MSFT, and AVGO |
48.8% |
24.1% |
24.5% |
|
Expense ratio |
0.09% |
0.03% |
0.15% |
|
Who this fund is good for: |
Investors who want a tech ETF that has beaten the Nasdaq-100 for 10 years -- although it's more concentrated in these four stocks. |
Investors who want to own the S&P 500 index of the 500 largest publicly traded companies in the U.S. -- including non-tech stocks. |
Investors who want to own a tech-heavy ETF of the 100 largest non-financial stocks in the Nasdaq, including some stocks that VGT doesn't own. |
Data sources: Vanguard, Invesco.
If you like the mix of stocks in the Vanguard Information Technology ETF and you're impressed by its long-term track record of beating the Nasdaq-100 index, then VGT could be a good choice. But if you're concerned that VGT is too concentrated in just four stocks (NVDA, AAPL, MSFT, and AVGO), you could own those four stocks with broader diversification just by buying an S&P 500 ETF or a Nasdaq-100 ETF.
Missed AI’s "Act 1"? Act 2 Could Be 14x Bigger
Most investors think they missed the AI boat because they didn't buy Nvidia in 2005.
But according to our analysts, we’re only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout, a massive technology build-out that Google’s CEO says could be more profound than fire or electricity.
While everyone watches the chip designers, one "backbone" company provides the critical technology that Nvidia and AMD literally cannot function without. We’ve detailed this under-the-radar player in our new AI Playbook.
Continue »
Ben Gran has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Broadcom, Cisco Systems, Intel, Lam Research, Meta Platforms, Micron Technology, Microsoft, Nvidia, Palantir Technologies, Tesla, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
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