The recent downturn in tech stocks presents a golden opportunity for investors to delve into or expand their positions in the Vanguard Information Technology ETF (NYSEMKT: VGT). This exchange-traded fund aims to replicate the performance of the MSCI U.S. Investable Market Information Technology 25/50 index, encompassing a spectrum of technology stocks ranging from semiconductors to smartphones to software.
1. A Track Record of Stellar Returns
The technology sector has been the top performer within the S&P 500 over the past decade, showcasing a significant lead over the next best-performing sector, consumer discretionary, by over 8% annually. Riding on the coattails of this sector, the Vanguard Information Technology ETF has delivered impressive results in the last 10 years. The ETF boasts an average annual return of 20.6% up to July, culminating in a cumulative return exceeding 550%. An initial investment of $10,000 a decade ago would have burgeoned to over $65,000 today.
Recent returns have been even more robust with an annual average of 22.1% over the last five years and 25.9% in the past year, establishing a noteworthy track record over an extended period.
2. Embracing Cost Efficiency
The Vanguard Information Technology ETF stands out for its low expense ratio of 0.10%. By curtailing high expense ratios that can erode long-term returns, this ETF allows investors to retain virtually all the returns generated by the underlying index.
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3. Exposure to Leading AI Innovators
The Vanguard ETF places a heavy emphasis on its top three holdings: Microsoft, Apple, and Nvidia, collectively constituting over 47% of its portfolio. These market giants are poised to be major beneficiaries of the everlasting reign of artificial intelligence (AI). Moreover, the ETF’s top 10 list includes other potential AI winners such as Broadcom, Advanced Micro Devices, Adobe, and Salesforce, offering diverse avenues for capitalizing on AI advancements.
From leading the way in GPU technology like Nvidia, to software innovation by Microsoft and Adobe, the ETF aligns with various aspects of the AI landscape, ensuring investors a well-rounded exposure.
4. A Buying Opportunity off Recent Peaks
Despite its impressive performance history, the Vanguard Information Technology ETF is currently trading significantly below its recent peak of $609.15 registered on July 15, presenting an over 9% discount from its 52-week high. For investors with a long-term view, this dip signifies an opportune moment to accumulate and gradually build up positions through dollar-cost averaging strategies.
Is Vanguard Information Technology ETF a Sound Investment?
Amidst the sea of investment options, carefully consider before delving into the Vanguard Information Technology ETF.
The Motley Fool Stock Advisor team recently highlighted the ten best stocks they believe will yield exceptional returns in the coming years. While the Vanguard Information Technology ETF wasn’t on that list, their past recommendations like Nvidia have culminated in substantial gains. The thorough insights provided by Stock Advisor could serve as a blueprint for investors’ success, offering guidance on portfolio construction, regular analyst updates, and two fresh stock suggestions monthly, signifying a robust track record.
Before proceeding with any investment decisions, it’s crucial to conduct thorough research and align investments with individual financial goals and risk tolerance levels.