Which Vanguard ETF Is the Better Buy Today?

Vanguard is one of the gold standards when it comes to low-cost exchange-traded fund (ETF) options. Undoubtedly, passive investing (typically with index funds) tends to be wildly popular among the retail crowd.

Among the most popular one-stop-shop types of funds, the Vanguard Information Technology Index Fund ETF (NYSEARCA:VGT) and broader Vanguard S&P 500 ETF (NYSEARCA:VOO) tend to be the picks of choice. Indeed, you really cannot go wrong by betting on the S&P 500. As they say, if you can’t beat the market, join them!

That said, for those looking for more upside, several tech-focused ETF offerings tend to provide more momentum and bang for the buck. While beating the market (the S&P 500) consistently is hard to accomplish, it does not seem all too hard if you’re heavy on the tech ETFs. Further, such tech index funds also come at very competitive prices, making it as cheap as ever to add a bit of a growth jolt to one’s portfolio.

Of course, higher growth tends to accompany higher risk. And if we are in the midst of a so-called “AI bubble” of sorts, the ride in tech ETFs could stand to be much bumpier, perhaps too bumpy for the many more aggressive passive investors who took an overweight position in them.

Key Points

In any case, let’s stack up the two popular Vanguard ETFs to see which may be the better bet for 2025 and beyond:

Vanguard Information Technology Index Fund ETF

The VGT makes it as cheap as it can be to maximize your portfolio’s exposure to the red-hot tech scene and all the emerging trends that could power it to greater gains than the S&P 500. Unsurprisingly, the most notable among them, of course, is artificial intelligence (AI). With a mere 0.10% expense ratio, you’re paying a rock-bottom fee for exposure to these U.S.-centric technological innovators.

Though you’re gaining exposure to hundreds of different tech firms, most of them are concentrated in the heavyweights. Most notably, the three largest companies in the world comprise around 45% of the ETF at the time of writing. Indeed, while the VGT exposes you to a wide range of names, close to half of the exposure is from the top four holdings, which is not necessarily a bad thing if you’re in the belief that bigger is better when it comes to technological innovation.

Over the past two years, the VGT has surged around 89%, far more than the 53% posted by the VOO. If you’re an aggressive investor who wants to bet on the “new economy” tech names rather than the traditional ones, the VGT may be a great bet as long as you’re ready for amplified volatility.

Vanguard S&P 500 ETF

The VOO really needs no introduction—it’s a low-cost (0.03% expense ratio) S&P 500 ETF that’s at the very core of the portfolios of countless Americans. It’s a go-to option, and for good reason: it’s the cheapest and quickest way to bet on the U.S. economy.

And while settling for market returns may feel like “giving up,” I do think that having a strong core to a portfolio is a must. When it comes to robust cores, it’s tough to find one that’s as good as a low-cost S&P 500 index fund or ETF.

Though the VOO provides instant diversification across a broad range of industries, the elevated concentration in the tech sector is notable—that’s what can happen when you have a cap-weighed index. If one sector has all the relative winners, the market can be heavily weighted towards a single sector or industry. At writing, around 32.5% of the VOO is focused on information technology. That’s quite large for most.

For some, it’s too much, in which case I’d suggest diversifying by buying and holding other passively managed ETFs in addition to the VOO. However, for those who can’t get enough tech and believe it’s a better fit to gain from the rise of the modern (AI-based) economy, the VGT could prove a better gainer in the next several years.

The better buy?

I’d rather go with the VOO over the VGT despite the latter’s recent outperformance. You’re already getting a lot of tech exposure from the VOO.

Overexposure to certain sectors could lead to amplified damage once sector-based sell-offs hit. If there are pockets of froth in tech, the VGT could have more downside in a bear market scenario. As such, the VOO would be my preferred choice for the long term.