My ETF makes absolutely no sense! About three years ago I had some extra cash to invest, so after a lot of research about best brokerages, I opened an account at Vanguard. I chose Vanguard because of their incredible reputation, low costs and easy to understand funds. The funds that I landed on investing in were Vanguard Total Stock Market Index (VTSAX) and Vanguard Information Technology (VGT). For those who don’t know, VTSAX is basically investing in the entire U.S. equity market at some of the lowest costs available. VGT, however, is a little different. VGT is Vanguard’s Information Technology ETF is an index made up of U.S. stocks of large, mid-size, and small U.S. companies within the information technology sector. It comes at a bit of a steeper price with an expense ratio of .10% but the growth so far has been amazing.
For the past 10 years it has returned 20% and since inception returned 11.93%.
However… I took a deeper look to understand what this basket of holdings was actually made up of. It turns out that 60% of the holdings in the ETF made up these 10 stocks:
- Apple
- Microsoft Corp.
- Visa
- Mastercard
- NVIDIA Corp.
- PayPal
- Adobe
- Intel Corp.
- Cisco Systems Inc.
- salesforce.com Inc.
I did some further digging and found that if I had just invested my $3,000 in these 10 stocks to begin with, I would have made $3,000 more in investment returns without sacrificing a lot of volatility. See chart below:
So where do I go from here? I’m not going to sell my VGT shares because it is still an amazing vehicle. But, I’m going to take some cash and invest in these 10 companies since there is a great mix of potential growth, with amazing established businesses and I’ll see what happens.
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