4 reasons to buy this ETF like there’s no tomorrow

The recent decline in tech stocks has provided investors with an excellent opportunity to start or add to positions in the Vanguard Information Technology ETF (VGT 0.23%). The exchange traded fund (ETF) tries to mimic the performance MSCI US Investable Market Information Technology 25/50 index, which consists of technology stocks involved in everything from semiconductors to smartphones to software.

Let’s look at four reasons why investors should buy this ETF like there’s no tomorrow.

1. A history of great comebacks

Technology was the best performing sector in the frame S&P 500 in the last decade by a wide margin. The performance of the sector exceeded the returns of the nearest sector, consumer discretionary, by more than 8% per annum during this period.

Given its ties to the technology sector, the Vanguard Information Technology ETF has delivered solid results over the past 10 years. During that time, it generated an average annual return of 20.6% through the end of July. On a cumulative basis, that’s a return of over 550%. A $10,000 investment made 10 years ago would be worth over $65,000 now.

Returns have been even stronger more recently, with an average annual return of 22.1% over the past five years and 25.9% over the past year. While past performance is not indicative of future performance, it is still an impressive track record over a long period of time.

2. Reduced costs

High expense ratios on ETFs and other funds can hurt long-term investment returns. That’s why it’s advantageous to find ETFs with low expense ratios.

The Vanguard Information Technology ETF, fortunately, has a very low expense ratio of 0.10%. For every $10,000 investors have in the ETF, they pay just $10 to the fund. This means that investors can keep virtually all of the returns that the underlying index produces.

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3. Exposure to leading AI companies

This Vanguard ETF is heavily weighted to its top three holdings: Microsoft, Appleand Nvidia. Combined, the three tech titans account for more than 47% of its portfolio.

All three companies have the potential to be among the biggest long-term beneficiaries of artificial intelligence (AI). In addition, the ETF’s top 10 also features a number of other potential AI winners, including Broadcom, Advanced microdevices, Adobeand Salesforce.

All of these actions give investors more ways to earn with AI. In terms of chips, Nvidia leads the way, with its market-leading graphics processing units (GPUs) helping to form the backbone of AI infrastructure development. However, AMD is well positioned as a solid second player in the GPU space, while Broadcom has benefited from providing switches and ethernet solutions used in GPU deployments.

Microsoft is a play on the cloud computing and software side of AI. Its Azure cloud computing business has grown rapidly as it helps customers build their own AI applications using its platform. Meanwhile, it is also seeing solid growth in its software platforms as it incorporates AI features into them. Adobe, for its part, was another software company that was at the forefront of incorporating AI into its product suite, as was Salesforce with Einstein Copilot and new Data Cloud offerings.

Apple is a potential play on a hardware upgrade cycle that will be necessary to run all the latest and greatest AI features at the consumer level. The company has also released its own AI features to run on its new Apple Intelligence platform, which will be built into the operating systems of its devices.

Overall, the Vanguard ETF has investors covered in almost every aspect of AI investing.

4. The ETF is at an all-time high

While the Vanguard Information Technology ETF has been a strong performer over the years, investors can buy the ETF well from its recent high of $609.15, which it hit on July 15. That’s more than 9% below the ETF’s 52-week high.

For investors with a long time horizon, this is a great investment to buy and then cost average over time by putting money into it every month.