XLK vs. VGT: A Comprehensive Comparison
If you want to invest in the technology sector, you have probably come across the VGT and XLK ETFs.
XLK vs. VGT Overview
These titanic ETFs represent an easily accessible way to get a cut of the tech sector’s pie.
XLK, managed by State Street, tracks the Technology Select Sector Index performance. It’s been around since December 1998.
VGT, the passively managed Vanguard fund, aligns with the MSCI US Investable Market Information Technology 25/50 Index performance, joining the fray in January 2004.
Being passively managed, both aim to mirror the performance of their underlying index as faithfully as possible. Providing broad exposure, XLK includes around 75 holdings, while VGT encompasses around 340.
XLK vs. VGT Expense Ratio
XLK - 0.10%
VGT - 0.10%
As far as expense ratios go, you’re looking at a dead heat. Both VGT and XLK charge investors an expense ratio of 0.10%.
This fee is on the lower end, making both funds cost-effective choices for those focusing on tech.
XLK vs. VGT Dividend Yield
When it comes to growth investing, dividends aren’t usually high on the priority list since you’re mostly investing for capital gains.
However, both VGT and XLK provide a decent dividend yield as a cherry on top. Both funds have a dividend yield of around 0.70%, which is good considering many technology companies don’t offer any dividends.
XLK vs. VGT Holdings
The main difference between the holdings of these ETFs is that XLK holds significantly fewer companies.
XLK holds around 75 companies, while VGT holds around 340 in its portfolio.
If you are looking for a more diverse array of technology stocks, VGT may be better for you.
XLK vs. VGT Performance Comparison
Ultimately, XLK and VGT will have a high correlation, but VGT is expected to come with less volatility due to its higher number of holdings.
Which outperforms the other? Well, it varies with market conditions. For instance, during tech booms, XLK usually outperforms VGT due to its concentrated holdings.
Conversely, in periods of broader technological advances across many firms, the diversified VGT may enjoy a more distributed rise.
XLK vs. VGT: Which is Better For You?
Before making a final call, consider your own financial landscape, goals, risk tolerance, and, yes, even gut instinct. If large-cap tech companies’ supremacy appeals to you, XLK’s concentrated holdings might make it the sweepstakes winner.
However, if you’re excited by a broader array of growing tech companies, VGT could be your champion.
Ultimately, due diligence, ongoing education, and careful consideration of your unique investment needs are the keys to choosing the ETF champion that best suits you.
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