Vanguard Information Technology ETF and iShares US Technology ETF: Two Visions of Tech Investing

• Vanguard Information Technology ETF charges a much lower expense ratio and offers a higher yield than iShares US Technology ETF
• IYW has delivered a slightly higher 1-year return, but VGT has a milder historical drawdown and holds over twice as many stocks
• VGT is nearly six times larger by assets under management compared to IYW.

Vanguard Information Technology ETF (NYSEMKT:VGT) stands out for its lower cost, higher yield, and deeper diversification, while iShares US Technology ETF (NYSEMKT:IYW) has a higher 1-year return and a more concentrated portfolio.

Both funds aim to capture the performance of the U.S. technology sector, but differ in approach and scale. IYW focuses on a tighter basket of large-cap tech names, while VGT spreads across a broader range of companies and boasts significantly higher assets under management. Here’s how these two popular ETFs compare across costs, performance, risk, and portfolio makeup.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months.

VGT is considerably more affordable than IYW on fees and also offers a modestly higher payout, thanks to a 0.09% expense ratio and 0.4% yield versus IYW’s 0.38% cost and 0.1% yield.

Performance & risk comparison

IYW has delivered slightly stronger five-year growth, but with a deeper maximum drawdown—suggesting more pronounced swings during market downturns. VGT’s milder drawdown may appeal to those seeking a smoother ride.

What's inside

Vanguard Information Technology ETF (NYSEMKT:VGT) holds 310 stocks and is one of the broadest technology ETFs, with 98% of assets in technology, plus small allocations to communication services and financials. Its top positions include NVIDIA (NASDAQ:NVDA), Apple (NASDAQ:AAPL), and Microsoft (NASDAQ:MSFT), with the fund’s long track record (21.8 years) adding to its appeal for buy-and-hold investors. There are no structural quirks or leverage resets.

IYW is more concentrated, with nearly 90% in technology and a slight tilt toward communication services. Like VGT, its largest holdings are Nvidia, Apple, and Microsoft, but it owns fewer stocks overall (141), making it more focused on mega-cap names. Neither fund introduces leverage, currency hedges, or other notable quirks.

For more guidance on ETF investing, check out the full guide at this link.

Foolish take

Vanguard Information Technology ETF and iShares US Technology ETF both give investors access to the companies powering America’s technology engine, and they do so through two very different philosophies.

VGT is built for breadth. It spreads its weight across more than three hundred holdings, charges a fraction of the cost, and offers a higher yield. That combination creates a steadier, more durable foundation for investors who want long-term exposure to the full spectrum of the tech sector without paying extra for it.

IYW takes a narrower route. By holding far fewer stocks and leaning harder into mega-cap leaders, it often captures more upside in strong years, and that is reflected in its slightly higher recent performance. The trade-off is that its drawdowns run deeper and its fee is noticeably higher. Investors need to be comfortable with sharper swings if they prefer IYW’s more concentrated profile.

Both ETFs are built for investors who believe in the long arc of American technology. VGT is better suited for investors who want their tech allocation to be cost-efficient, deeply diversified, and structurally resilient across cycles. It is the steadier anchor for long-term portfolios. IYW appeals to investors who want a more concentrated expression of large-cap innovation and are comfortable riding through sharper swings to pursue that focus. The real distinction is which fund can maintain a tech allocation consistently across every phase of the cycle, and Vanguard Information Technology ETF's structure gives it the stronger claim to that role.

Glossary

ETF: Exchange-traded fund; a pooled investment fund traded on stock exchanges, like a stock.
Expense ratio: The annual fee, as a percentage of assets, charged by a fund to cover operating costs.
Dividend yield: Annual dividends paid by a fund as a percentage of its current price.
Assets under management (AUM): The total market value of assets a fund manages on behalf of investors.
Beta: A measure of a fund's volatility compared to the overall market; higher than 1 means more volatile.
Drawdown: The largest observed loss from a fund's peak value to its lowest point over a period.
Max drawdown: The greatest percentage drop in value from peak to trough during a specific time frame.
Concentrated portfolio: An investment fund that holds relatively few securities, focusing on select companies or sectors.
Diversification: Spreading investments across various assets to reduce risk.
Leverage: Using borrowed money or financial instruments to increase potential returns (not used by these funds).
Currency hedge: A strategy to reduce the impact of currency fluctuations on investment returns.

Eric Trie has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.