Is the Vanguard Information Technology ETF the Right Fit for Your Portfolio Before Summer?

Tech stocks person stormed backmost successful caller weeks and person a batch of momentum heading into the summer.

But adjacent arsenic the Nasdaq has rallied, the Vanguard Information Technology ETF (NYSEMKT: VGT) has performed adjacent better. The Vanguard Information Technology ETF is up 22% year-to-date (YTD) and 50% implicit the past 12 months.

That's importantly amended than the Nasdaq 100 and the Invesco QQQ (NASDAQ: QQQ), which tracks the Nasdaq 100. The QQQ is up astir 17% YTD and astir 39% implicit the past year.

Here's wherefore the Vanguard Information Technology ETF is simply a large enactment for investors looking for much vigor successful their portfolios heading into the summer.

Broad vulnerability to tech stocks

The tech banal rally implicit the past 2 months has lifted the Nasdaq to an all-time precocious and it conscionable keeps rising, touching 26,700 connected May 14.

While investors should beryllium wary of rising valuations, tech ETFs are a large mode to pat into the alpha that the tech assemblage offers. While a perchance overvalued idiosyncratic tech banal could beryllium derailed by a macroeconimic oregon geopolitical shock, an ETF gives you the extortion of a diversified portfolio. This way, if 1 overvalued tech banal stumbles, the harm is constricted successful a diversified portfolio.

That said, the Vanguard Information Technology ETF is simply a axenic exertion stock, dissimilar the QQQ, which includes the 100 largest non-financial stocks, truthful it has adjacent much alpha, which has helped assistance its instrumentality higher than the Nasdaq.

At the aforesaid time, the ETF is much diversified wrong the assemblage than astir tech ETFs. It tracks the show of the MSCI US Investable Market Information Technology 25/50 Index, which includes large-, mid-, and small-cap tech stocks with definite screens successful spot to bounds the vulnerability to immoderate 1 stock.

The VGT holds astir 316 tech stocks astatine contiguous with Nvidia (NASDAQ: NVDA), Apple (NASDAQ: AAPL), and Microsoft (NASDAQ: MSFT) the 3 largest holdings.

VGT beats the QQQ

There truly isn't a atrocious clip to put successful the tech assemblage via an ETF. While tech stocks are prone to short-term swings, implicit the semipermanent they person outperformed the broader marketplace by a wide margin.

I've already laid retired VGT's outperformance YTD and implicit the past 12 months. It's the aforesaid implicit the longer term. The VGT has a five-year annualized instrumentality of 20.9% and a 10-year instrumentality of 24.3%. The Invesco QQQ has annualized returns of 17.6% and 21.2% implicit those periods, respectively. The S&P 500 lags with five- and 10-year annualized returns of 12.7% and 13.8% respectively.