The Unstoppable Vanguard ETF to Consider for 2025

Making the right investment choice can significantly boost your portfolio, and one of the most straightforward ways to build wealth is through exchange-traded funds (ETFs). They offer a hassle-free way to invest, allowing you to put your money into a diverse set of securities all at once.

Essentially, an ETF is a collection of various securities pooled into a single fund. This means that you can invest in numerous stocks with just one transaction. If you're busy or simply prefer a low-maintenance investment approach, choosing ETFs can help you create a diversified portfolio with minimal effort compared to purchasing individual stocks.

The market is flooded with numerous ETFs, and the ideal choice for you will depend on your investment goals and personal preferences. However, one ETF that stands out and that I'm planning to accumulate in 2025 is the Vanguard Information Technology ETF (VGT 0.52%).

A powerhouse in technology to boost your savings

The Vanguard Information Technology ETF is specifically designed for tech enthusiasts and includes 314 stocks from all sectors within the technology industry.

Large tech companies dominate this fund, with the three biggest holdings—Apple, Nvidia, and Microsoft—accounting for nearly 45% of the total fund. The remaining 311 stocks contribute a smaller portion to the ETF.

This combination of leading companies and smaller firms can provide a balanced approach to risk and potential reward. You gain exposure to renowned companies like Apple and Nvidia while benefiting from the diversification that comes with investing in a substantial number of stocks all at once.

If you're seeking a way to invest in the tech industry with minimal hassle, this ETF might be an excellent choice. The technology sector has played a crucial role in driving market gains in recent years.

Over the past decade, the average annual return for the Vanguard Information Technology ETF has been 20.59%. If you were to invest, for example, $200 each month, you could amass over $1.2 million after 25 years.

Key risk factors to consider

One of the main risks associated with investing in a tech-focused ETF is the industry's inherent volatility. While technology stocks can yield outstanding returns during market upswings, they can also experience significant declines during downturns.

For instance, in the last bear market from January to October 2022, the S&P 500 (^GSPC 0.25%) dropped about 25%. In comparison, the Vanguard Information Technology ETF fell by nearly 35% during the same period.

However, it’s essential to recognize that the strong market performance often compensates for these dips. Since the new bull market began in October 2022, this ETF has surged by 114%, while the S&P 500 gained around 70%.

Nonetheless, predicting future performances is never guaranteed, and there is always a possibility that this ETF may not surpass the market. When engaging with more volatile investments, investors should be prepared to endure periods of lower returns before achieving higher gains.

Safeguarding your portfolio effectively

If you decide to invest in the Vanguard Information Technology ETF, it is a good idea to ensure your entire portfolio is well-diversified. Relying solely on the tech sector can significantly increase your investment risk, so it's important to balance your holdings with stocks from various other sectors.

This could involve investing in a broader market fund, such as an S&P 500 ETF or a total stock market ETF, which would provide exposure to a wide array of industries. Alternatively, you might consider creating a custom portfolio that includes individual stocks outside the technology industry.

If you are okay with taking on a bit more risk in exchange for the potential of higher returns, the Vanguard Information Technology ETF may be an excellent option as we approach 2025. When part of a well-rounded and diversified portfolio, it could substantially enhance your investment growth with little input needed from your side.

The author has positions in Vanguard World Fund–Vanguard Information Technology ETF. The author also has positions in and recommends Apple, Microsoft, and Nvidia. The author recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft.

investment, ETF, technology