Which Broad Tech ETF is the Best Buy Right Now?

of the Choose the State Road Technology Sector SPDR ETF (NYSEMKT:XLK) and d Vanguard Information Technology ETF (NYSEMKT:VGT) Both are designed to give investors exposure to the US technology sector, tracking similar segments of the market.

This comparison examines their costs, performance, risk, and portfolio structure to clarify which ETF might appeal to you based on your priorities.

Beta measures price volatility relative to the S&P 500; Beta is calculated from five years of monthly returns. The 1-year return represents the total return over the past 12 months.

XLK charges slightly lower fees at 0.08% compared to VGT’s 0.09%, making it a touch more affordable. XLK also offers a slightly higher dividend yield, which may appeal to those looking for a lower income share.

VGT attempts to track the performance of the US IT sector, using full replication and sampling strategies. With 320 holdings, it offers broad exposure to technology and subsectors such as electronics, software, and semiconductors. Its greatest positions include Nvidia, Appland Microsoft.

XLK, by contrast, is more focused, with 71 technology-focused stocks. Its top three holdings are aligned with VGT, but the fund excels in its sector coverage.

For more guidance on ETF investing, see the full guide at this link.

XLK and VGT are both tech-focused ETFs that hold stocks from all corners of the industry. The primary difference between them is their level of diversity.

VGT has about 4.5 times as many stocks as XLK, but it also allocates a larger portion of assets to its top three holdings. While the two funds share the same top three stocks, they make up 43.32% of VGT’s portfolio, compared to 37.91% for XLK.

In other words, while VGT is broad in terms of number of stocks, it is slightly more concentrated on mega-cap tech stocks. If Nvidia, Apple, or Microsoft do significantly more or less, it could affect VGT more than XLK.

While XLK has outperformed VGT in both one- and five-year total returns, VGT’s broad reach gives it greater exposure to the technology sector. VGT may be a good fit for those looking for broad access to as many tech stocks as possible, while investors looking for a narrower portfolio with less exposure to mega-cap names may prefer XLK.

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Katie Brockman holds positions in Vanguard Information Technology ETF. The Motley Fool owns and recommends positions in Apple, Microsoft, and Nvidia and is short Apple shares. Motley Fool has a disclosure policy.

VGT vs. XLK: Which Broad Tech ETF is the Best to Buy Right Now? Originally published by Motley Fool