We are going to explore the difference between Vanguard Growth ETF (VUG) vs Vanguard Information Technology ETF (VGT).
When it comes to investing there is no shortage of fund options. Choosing between two funds can be difficult, but I will make it easy for you to decide between VUG and VGT.
VUG vs VGT
The primary difference between VUG and VGT is the index the fund tracks and the expense ratio.
VUG tracks the CRSP US Large Cap Growth Index.
VGT tracks the MSCI US IMI Info Technology 25/50 (Benchmark)
Another significant difference is the expense ratio of each, with VGT having an expense ratio of 0.1% compared to only 0.04% with VUG.
- Tracks the CRSP US Large Cap Growth Index
- Has an expense ratio of 0.04%
- No minimum initial investment
- Holds 287 stocks
- Tracks the MSCI US IMI Info Technology 25/50 (Benchmark)
- Has an expense ratio of 0.1%
- No minimum initial investment
- Holds 357 stocks
VGT vs VUG Performance
VGT and VUG have performed differently over the last 10 years with VGT beating VUG by more than 3% annually. However, that does not guarantee the next 10 years will look the same.
Similarities between VUG and VGT:
- Vanguard Exchange-Traded Funds (ETFs)
- Similar Amount Of Holdings
- Focused On Growth Companies
- Low Expense Ratios
- Both Have Equivalent Admiral Funds (VITAX & VIGAX)
Here is how their performance compares:
VUG (Blue) VGT (Yellow)
As you can see, VGT has significantly beat VUG over the last 10 years.
VUG and VGT Differences
VUG vs VGT primarily differ in that VUG tracks the CRSP US Large Cap Growth Index and has a lower expense ratio compared to VGT. By investing in an ETF with low expense ratios you keep more of your returns which can make a big difference over time.
Differences between VUG and VGT:
- Different Number Of Holdings (~287 vs ~357)
- Expense Ratio
- Index The Fund Tracks
- Fund Inception: 2004
- Expense Ratio: 0.04%
- Number Of Stocks: 287
- Top 10 Holdings: 47%
- Equivalent Admiral Fund (VIGAX)
Here are the top 10 holdings for the Vanguard Growth ETF (VUG):
The fund, as of September 2021 has $169 billion total net assets.
VUG is largely made up of Apple, Microsoft, Google, Amazon, and Facebook and provides exposure to over 250 stocks. However, with the top 10 holdings making up close to 50% of the portfolio, it isn’t very diversified compared to other ETFs such as Vanguard Total Stock Market Index Fund ETF (VTI).
- Fund Inception: 2004
- Expense Ratio: 0.1%
- Number Of Stocks: 357
- Top 10 Holdings: 57.1%
- Equivalent Admiral Fund (VITAX)
Here are the top 10 holdings for the Vanguard Information Technology ETF (VGT):
The fund, as of June 30th, 2021 has $54.1 billion total net assets.
VGT is largely made up of Apple, Microsoft, NVIDIA, VISA, and Paypal and provides exposure to over 300 stocks.
No Minimum Investment
VGT and VUG are both exchange-traded funds (ETFs) which mean there is NO minimum investment. Investors looking to buy fractional shares can use platforms like M1 Finance. ***(Get $50 When You Use This Link)***
Normally, fractional shares are not available for ETFs but with M1 Finance you can purchase fractional shares with no commission.
Buying fractional shares allows you to maximize your investment. You no longer have to keep your money sitting idle until you have enough to purchase a full share. This is especially beneficial when it comes to shares of VUG or VGT due to their high prices per share (~$319/Share and $449/Share respectively).
VGT Historical Returns
Take a look at the historical chart below. You can see that VGT has outperformed the S&P 500 over the last 10 years.
VGT (Blue) S&P 500 (Yellow)
However, be mindful that this does not guarantee the next 10 years will look the same.
VGT was created in 2004 and currently has an expense ratio of 0.1% which isn’t high but compared to VUG it is more than double the cost.
To put some perspective on that; here is what a 0.06% fee (difference between VGT and VUG) will cost you as an investor over 30 years.
Assuming you start with an initial investment of $100,000 and contribute $10,000 each year, over the 30 years. You will have roughly ~$49,000 less in your account due to the fee because of the extra 0.06% expense ratio. This does not include costs to buy and sell your shares.
Which is Better VUG or VGT?
VUG and VGT are great investments. They both offer investors the ability to invest in high-growth companies at a low expense ratio. VGT offers more diversification since it holds more stocks. However, I would consider this difference significant.
If you believe the success of VGT will continue and are willing to pay slightly more for those potential returns, then VGT makes for a great investment.
However, if you prefer to invest in ETFs with the absolute lowest expense ratio to keep costs low, then VUG would be best. As we saw in the example above, it’s important to consider costs and fees because they can add up in the long run. One way to keep costs down is to purchase and sell your shares commission-free.
Again a great way to do this is with M1 Finance. You can purchase fractional shares for free and they give you the ability to buy VGT, VUG, and thousands of other stocks/ETFs.
Is VGT or VUG Better for Financial Independence?
Both VGT and VUG can get you to Financial Independence Retire Early (FIRE). They are both Vanguard ETFs with low expense ratios.
Being part of the FIRE community I know we aim for the lowest fees possible and we’re a big fan of Vanguard.
My Winner: VUG
My winner is VUG solely based on the lower expense ratio of only 0.04%. This is extremely low and means you keep more money in your portfolio.
However, I love that both ETFs are Vanguard funds which is a brokerage that is investor-owned. This means they don’t have an obligation to their investors to maximize profits, that’s how they keep their funds at such a low cost.
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This information is my opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.