Exchange-traded funds (ETFs) have become a popular investing instrument over the past few years. There are many different types, both passively and actively managed, covering all kinds of investing styles and categories. Many investors can benefit from owning a range of ETFs, and the Vanguard Information Technology ETF (VGT +0.43%) is one of the best ones to own today.
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More than just AI
There's no question that the S&P 500's surge this year is in large part due to advances in artificial intelligence (AI). The S&P 500 is a weighted index, and since the largest stocks in the index are much bigger than the smaller ones, they also account for a huge percentage of the total index. The Vanguard Information Technology ETF similarly tracks an index focused on tech stocks.
This ETF is largely focused on AI today because AI stocks make up such a substantial portion of tech stocks. However, since the ETF is concentrated in tech stocks in general and is passively managed, whatever is trending and driving the market will end up in the ETF.
Currently, the ETF has 314 stocks with Nvidia, Apple, and Microsoft together making up about 45% of the total. That gives investors access to AI growth among the sector's leading companies. Like all Vanguard ETFs, this one has a low expense ratio of 0.09%, leaving more of the gains for investors.
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Key Data Points
That strategy has led to market outperformance over time. It looks like it could be limited to current trends because of AI, but not only is the ETF up 21% this year, beating the market's 17% rise, it also has the highest annualized gains of any Vanguard ETF over the past 10 years, at 22%.
