The Best Tech ETF to Invest $1,000 in Right Now

Source The Motley Fool

There hasn't been a more flourishing category in the stock market over the past decade than the information technology sector. In that span, the tech sector of the S&P 500 is up around 576%, while the next closest is the consumer discretionary sector at 237% (as of Dec. 9).

Considering how much technology has transformed the world around us, it's no surprise that the sector has been so successful (and profitable for investors). However, the explosion of mega-cap tech stocks has done a lot of heavy lifting for the sector, so it's not all sunshine across the board.

That said, if you have $1,000 to invest right now and want to add some tech stocks to your portfolio, the Vanguard Information Technology ETF (NYSEMKT: VGT) is a good choice.

^SPXIFTS Chart

^SPXIFTS data by YCharts.

So, what is the Vanguard Information Technology ETF?

This exchange-traded fund (ETF) contains small-, mid-, and large-cap companies operating in different industries within the tech sector. Here are the industries represented in the ETF and how much of it they account for (as of Oct. 31):

  • Application software: 15.4%
  • Communications equipment: 3.6%
  • Electronic components: 1.4%
  • Electronic equipment and instruments: 1.8%
  • Electronic manufacturing services: 1.2%
  • Internet services and infrastructure: 1.7%
  • IT consulting and other services: 3.7%
  • Semiconductor materials and equipment: 3.4%
  • Semiconductors: 29.7%
  • Systems software: 19.8%
  • Technology distributors: 0.7%
  • Technology hardware, storage and peripherals: 17.6%

With this ETF, you know you're getting exposure to the broad tech sector, covering some of its most important and thriving industries. Tech has many moving parts, so if you're looking to invest in it as a whole, this ETF is the way to go.

It contains younger, up-and-coming companies operating in more niche industries (like Snowflake with data warehousing) as well as tech titans that have been around for decades and have their hands in many different pots (like Microsoft). It's the best of both worlds.

This ETF has a history of outperforming the market

Past results never guarantee future performance, but it's often worth looking at historical results to get a sense of an investment's potential. Here's how $1,000 in the ETF has performed since it hit the market in January 2004:

VGT Chart

VGT data by YCharts.

When factoring in dividends, every $1,000 invested at the ETF's start would be worth over $15,000 today. That's impressive, considering the market's performance based on the S&P 500's returns over that span.

Even if we meet in the middle between the ETF's and S&P 500's performance and assume it averages 12% annual returns (emphasis on "assume"), a $1,000 investment today could be worth over $3,100 and $5,400 in 10 years and 15 years, respectively.

The ETF is heavily influenced by a few companies

One thing I would tell investors to be cautious about is the ETF's high concentration in Apple (NASDAQ: AAPL), Nvidia (NASDAQ: NVDA), and Microsoft stocks.

Company Percentage of the ETF
Apple 15.76%
Nvidia 15.40%
Microsoft 13.35%

Source: Vanguard. Percentages as of Oct. 31.

Three companies making up over 44% of a 314-stock ETF isn't the ideal portfolio balance because it typically ends in one extreme or the other. Either those three companies flourish and carry the ETF (which has been the case recently), or they hit a rough patch, which weighs down the ETF.

You can't predict how individual stocks will perform in the near term, but I don't have any true concerns about those companies' long-term potential. Apple continues to dominate consumer electronics and is the world's third most-profitable public company; Nvidia is at the forefront of artificial intelligence advancements; and Microsoft is the Swiss Army knife of the tech world, with its hand in almost every industry the sector has.

If there were three companies you could feel comfortable leading the charge for an ETF, those three are top of the list right now. You'll likely look back at a $1,000 investment today and be glad you made the move.

Should you invest $1,000 in Vanguard World Fund - Vanguard Information Technology ETF right now?

Before you buy stock in Vanguard World Fund - Vanguard Information Technology ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard World Fund - Vanguard Information Technology ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $853,765!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of December 9, 2024

Stefon Walters has positions in Apple and Microsoft. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, and Snowflake. 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.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
AUD/USD: Current price action is likely the early stages of a recovery – UOB GroupAustralian Dollar (AUD) is likely to trade in a sideways range between 0.6220 and 0.6290. In the longer run, current price action is likely the early stages of a recovery phase that could potentially reach 0.6350, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.
Author  FXStreet
Jan 22, Wed
Australian Dollar (AUD) is likely to trade in a sideways range between 0.6220 and 0.6290. In the longer run, current price action is likely the early stages of a recovery phase that could potentially reach 0.6350, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.
placeholder
Five bullish Shiba Inu (SHIB) Price Predictions for April 2025SHIB price targets diverge as investors weigh Shibarium L3 upgrades, burn-rate surges, and altcoin market sentiment. Forecasts range from a conservative $0.000012 to a parabolic $0.00030.
Author  FXStreet
Apr 16, Wed
SHIB price targets diverge as investors weigh Shibarium L3 upgrades, burn-rate surges, and altcoin market sentiment. Forecasts range from a conservative $0.000012 to a parabolic $0.00030.
placeholder
Ethereum Price Stays Resilient — Upside Break May Be AheadEthereum price started a downside correction below the $1,780 level. ETH is now consolidating near the $1,800 zone and might aim for a move above $1,820.
Author  NewsBTC
23 hours ago
Ethereum price started a downside correction below the $1,780 level. ETH is now consolidating near the $1,800 zone and might aim for a move above $1,820.
placeholder
Gold price slides back closer to $3,300 amid tariff deals optimismGold price (XAU/USD) struggles to capitalize on the previous day's bounce from the vicinity of the $3,265-3,260 pivotal support and attracts fresh sellers during the Asian session on Tuesday.
Author  FXStreet
20 hours ago
Gold price (XAU/USD) struggles to capitalize on the previous day's bounce from the vicinity of the $3,265-3,260 pivotal support and attracts fresh sellers during the Asian session on Tuesday.
placeholder
EUR/USD ticks lower despite uncertainty over US-China tradeEUR/USD edges lower to near 1.1400 during European trading hours on Tuesday. The major currency pair ticks lower as the US Dollar (USD) steadies, but remains broadly on edge amid escalating uncertainty about the trade outlook between the United States (US) and China.
Author  FXStreet
17 hours ago
EUR/USD edges lower to near 1.1400 during European trading hours on Tuesday. The major currency pair ticks lower as the US Dollar (USD) steadies, but remains broadly on edge amid escalating uncertainty about the trade outlook between the United States (US) and China.
goTop
quote