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The ETF is quite diversified, holding more than 300 tech stocks. It has a sizable position in three of the "Magnificent Seven" companies.
Tech stocks have been strong performers thanks to earnings growth and positive investor sentiment. Exchange-traded funds (ETFs), by their nature, include both beaten-down and red-hot stocks.
The Vanguard Information Technology ETF (VGT) is dominated by Apple, NVIDIA, and Microsoft, which together account for 44% of the ETF. The VGT ETF's recent underperformance relative to the S&P 500 suggests sector rotation is occurring, as investors shift from expensive tech stocks to cheaper sectors. Technology's underperformance is also consistent with late-cycle dynamics, suggesting caution is warranted.
Tech is currently the most overcrowded sector, likely facing a meaningful correction soon, making it a risky allocation right now. Vanguard Information Technology ETF offers broad tech exposure but has high concentration risk in top holdings like Apple, Microsoft, and Nvidia. VGT outperforms peers like XLK due to more diversified holdings and lower fees, but the sector's volatility and concentration risk are significant concerns.
Investing in the stock market is a proven way to generate long-term wealth. ETFs are lower-maintenance and can help minimize risk.
Vanguard ETFs holding mega-cap growth stocks have been putting up monster gains. Three of these ETFs have roughly 60% of their holdings in just 10 stocks.
The Vanguard Information Technology ETF has a strong track record. It gives investors instant access to a number of top AI companies.
The top three holdings make up over 47% of the Vanguard Information Technology ETF. If this Vanguard ETF's top holdings experience a correction, it'll have a tangible effect on the overall ETF.
Tech-focused ETFs carry more risk, but they also have far more potential for reward. Investing consistently can help maximize your long-term earnings.
The S&P 500 has generated better-than-usual returns over the past 10 years. Focusing on tech stocks, however, has provided investors with even better returns.