We Compare VUG vs VGT: Vanguard Growth ETF (VUG) vs Vanguard Information Technology ETF (VGT)
These are two popular Vanguard Exchange Traded Funds (ETFs). This article will help you decide between VUG and VGT.
VUG vs VGT
The primary difference between VUG and VGT is their expense ratio. VUG has a low expense ratio of 0.04%. VGT has an expense ratio of 0.1%. VGT is 2.5 times more expensive!
Another difference is the index they track:
VUG tracks the CRSP US Large Cap Growth Index
VGT tracks the MSCI US IMI Info Technology 25/50 (Benchmark)
- 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
VUG vs VGT Performance
VUG and VGT 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.
VUG (Blue) VGT (Yellow)
As you can see, VGT has significantly beat VUG over the last 10 years.
Similarities between VUG and VGT:
- Vanguard Exchange-Traded Funds (ETFs)
- Similar Amount Of Holdings (287 vs 357)
- Focus On Growth Companies
- Both Have Equivalent Admiral Funds (VITAX & VIGAX)
VUG and VGT Differences
VUG vs VGT primarily differs in that VUG’s expense ratio is 0.04% and VGT’s expense ratio of 0.1%. They also track different indexes. VUG tracks the CRSP US Large Cap Growth Index. VGT tracks MSCI US IMI Info Technology 25/50.
VUG has a significantly lower expense ratio. By investing in an ETF with a low expense ratio, you keep more of your returns. This can make a big difference over time.
Differences between VUG and VGT:
- Expense Ratio (0.04% vs 0.1%)
- Index The Fund Tracks
- Fund Inception: 2004
- Expense Ratio: 0.04%
- Number Of Stocks: 287
- Top 10 Holdings: 47%
- Equivalent Admiral Fund (VIGAX)
Vanguard Growth ETF (VUG) is an ETF focused on growth companies. The price-to-earning (P/E) ratio for VUG is 38.8x which is high. The fund has $169 billion in total net assets.
VUG Top 10 Holdings
Vanguard’s VUG is largely made up of Apple, Microsoft, Google, Amazon, and Facebook and provides exposure to over 250 stocks.
The top 10 holdings make 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)
Vanguard Information Technology ETF (VGT) is an ETF focused on companies in the information technology sector. The price-to-earning (P/E) ratio for VGT is 33x which is also high. The fund has $54.1 billion in total net assets.
VGT was created in 2004 and currently has an expense ratio of 0.1%. This isn’t high but compared to VUG it is more than double the cost.
Here is what a 0.06% fee (difference between VGT and VUG) will cost you 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.
VGT Top 10 Holdings:
Vanguard’s VGT is largely made up of Apple, Microsoft, NVIDIA, VISA, and Paypal and provides exposure to over 300 stocks.
Vanguard’s 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.
How To Invest In VUG or VGT
Regardless of whether you use Vanguard or M1 Finance, the important part is purchasing VUG or VGT commission-free. This way you keep more money invested.
I also use Personal Capital to track my investment fees. They have a free Retirement Fee Analyzer that tells you the future impact of fees on your portfolio.
Personal Capital’s free tools allow you to easily find which of your investments has high fees so that you can switch them to low-cost options. (Get a $20 Amazon Gift Card with this link when you add at least one investment account containing a balance of more than $1,000 within 30 days)
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 potential returns but also more volatility.
If you believe the success of VGT will continue and are willing to pay more for those potential returns, then VGT makes for a great investment.
If you prefer to invest in ETFs with the absolute lowest expense ratio 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. 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.
In the FIRE community, we aim for the lowest fees possible and we’re big fans 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.
There is no guarantee that VGT will outperform VUG over the next 10 years. There is a guarantee that it will cost more.
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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.