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Exploring the Vanguard Information Technology ETF: A Smart Investment for 2025 and Beyond
The right investments can significantly enhance your portfolio, and exchange-traded funds (ETFs) offer an effortless approach to boost your savings.
An ETF is a collection of securities grouped into a single investment. Each fund includes numerous stocks, so purchasing just one share of an ETF grants you ownership in all the companies held within that fund.
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While ETFs generally require less effort compared to buying individual stocks, they can help you accumulate substantial wealth. Personal investment goals vary, but there’s one Vanguard ETF I’m particularly enthusiastic about for 2025 and beyond.
Image source: Getty Images.
Harnessing the Power of Technology
If you’re interested in the tech sector without the hassle of researching individual companies, consider a tech-focused ETF. The Vanguard Information Technology ETF (NYSEMKT: VGT) is one I plan to invest in.
This ETF comprises 316 stocks from various segments of the tech industry. The fund’s diverse collection of large and smaller companies aids in balancing risk and reward.
The top three holdings are Apple, Nvidia, and Microsoft, which together represent nearly 45% of the fund. The remaining 313 stocks make up the other 55%.
Established giants like Apple, Nvidia, and Microsoft can offer steadiness during market fluctuations, while smaller stocks can provide higher growth potential. If one of those smaller companies excels, you may see significant returns.
Historical Performance: Strong Returns
Investing in a sector-specific ETF like this one often leads to above-average returns compared to a broad-market ETF. Historically, tech stocks tend to deliver higher average returns than those from other industries. Investing in a tech-heavy fund could accelerate your gains.
However, the tech sector is known for its volatility. While peaks can be rewarding, declines can also be steep.
VGT data by YCharts.
Whether this volatility suits your risk tolerance will dictate your investment decision. Those seeking stability might find a tech ETF unsuitable. Conversely, if you are prepared to face risks for the potential of higher returns, this ETF could be a wise choice.
Projected Earnings from Your Investment
No investment is without risk, and past performance does not guarantee future success. Although the Vanguard Information Technology ETF has consistently outperformed the market, ongoing success is not certain.
If it succeeds in achieving even slightly higher-than-average returns, substantial profits could follow. Since its launch in 2004, the ETF has delivered an average annual return of 13.70%. Over the past decade, it has performed even better, with a 20.75% average return—well above the market average of about 10% per year.
Suppose you invest $200 monthly in this ETF, aiming for average annual returns of either 11%, 14%, or 20% in the future. Here’s an estimated breakdown of potential portfolio values over time:
| Number of Years | Total Portfolio Value: 11% Average Annual Return | Total Portfolio Value: 14% Average Annual Return | Total Portfolio Value: 20% Average Annual Return |
|---|---|---|---|
| 20 | $154,000 | $218,000 | $448,000 |
| 25 | $275,000 | $436,000 | $1,133,000 |
| 30 | $478,000 | $856,000 | $2,837,000 |
Data source: Author’s calculations via investor.gov.
While it’s uncertain whether this ETF can sustain its 20% average annual performance, even conservative returns could yield impressive gains over decades of consistent investment.
Tech-focused ETFs are not universally suitable, so ensure your overall investment strategy is diversified to mitigate risk. Yet, with patience and discipline, the Vanguard Information Technology ETF can significantly enhance your savings.
Is Now the Right Time to Invest $1,000 in Vanguard Information Technology ETF?
Before purchasing shares of the Vanguard Information Technology ETF, consider this:
The Motley Fool Stock Advisor analysts identified what they believe are the 10 best stocks to buy at this moment. Notably, Vanguard Information Technology ETF is not listed among them. The selected stocks may offer great returns in the coming years.
For instance, when Nvidia was recommended on April 15, 2005, a $1,000 investment would now be worth $885,388!*
Stock Advisor offers investors a clear path towards success, featuring guidance on portfolio building, regular insights from analysts, and two fresh stock picks monthly. Additionally, Stock Advisor has more than quadrupled the return of the S&P 500 since 2002*.
Explore the 10 stock picks »
*Stock Advisor returns as of December 30, 2024
Katie Brockman has positions in Vanguard World Fund-Vanguard Information Technology ETF. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. 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.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
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