Are you undecided whether to put your hard-earned money into an exchange-traded fund (ETF) or a mutual fund, say VGT vs. VITAX? Let’s compare and contrast these two popular yet distinct funds to see which one deserves a slot in your investment portfolio.
Before investing, it’s best to know your options to have a good investment strategy and not waste your money saved from years of working. Investing in funds is a great way to build a diversified portfolio and earn a passive income.
The Vanguard Company is one of the US’s largest mutual and exchange-traded funds providers. The company’s low-cost orientation for its products is the key reason for a significant increase of assets in its offered funds in recent years.
Today, we will be comparing two passively-managed, renowned technology funds from Vanguard: VGT and VITAX. These funds track the performance of the information and technology sector, which are market-capitalization-weighted. That implies that if a company is bigger in size, a bigger percentage of that company is allocated to the fund.
These funds offer investors exposure to the largest companies in the technology sector. They are a good option if you want diversification in your portfolio, including financial and technology companies.
We’ll look at the key features of VGT and VITAX and their respective differences, including their composition and performance.
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VGT: Vanguard Information Technology Index Fund ETF
VGT is the Vanguard Information Technology Index Fund ETF. It was formed on 26th January 2004. VGT seeks to track the performance of a standard index, which measures the returns of investment for stocks of information technology companies.
This Vanguard ETF particularly seeks to track the performance of the MSCI US Investable Market Information Technology Index. This index is market capitalization-weighted and comprises stocks of various companies within the information and technology sector, including large, medium, and small-sized companies.
If you consider the market-cap-weighted technology exchange-traded funds, VGT is one of the most diverse funds. The fund mostly comprises stocks in the computer and electronics industry or those companies that work on the principles of applied sciences to manufacture various products.
VGT holds 357 stocks in total. Currently, it has $58.51 billion in total net assets.
This investment fund has an expense ratio of 0.1% and only requires a minimum initial investment of one share. Compared to the other funds in the technology sector, VGT has a lower expense ratio, thus, a lower fund management fee for the shareholder to pay. It is, in fact, around 82% less than the other funds in the same category.
On top of that, VGT has a dividend yield of 0.61%.
VITAX (Vanguard Information Technology Index Fund Admiral Shares) was formed on 25th March 2004 by the Vanguard group. VITAX is a technology mutual fund that seeks to track the performance of a standard index that measures the return of investment for stocks of information technology companies.
Among Vanguard mutual funds, VITAX predominantly pursues to track the performance of the MSCI US Investable Market Information Technology Index. This index is market-cap weighted and comprises stocks of various companies within the information and technology sector, including large, medium, and small-sized companies.
VITAX includes stocks from the US- and non-US-based companies, particularly in high-tech areas like networking, software, and semiconductors.
While it comprises stocks from companies of all sizes, the large-sized companies make up the largest percentage of its entire portfolio. These mostly include stocks of companies in the technology sector, technology equipment and services, technology software and consulting, etc.
VITAX has 359 total holdings and a net asset value worth $64.56 billion. The fund requires a minimum investment of $100,000 and has an expense ratio of 0.1%. The dividend yield of VITAX is 0.66%.
VITAX is classified by Vanguard as an aggressive fund, implying that the fund is prone to having high volatility. High volatility generally means it has a higher risk. However, it is a viable investment option for the long-term investor community.
VGT vs. VITAX: Key Differences
Now that we have looked at the descriptions of the two funds, it would not be wrong to assume that there are a lot of similarities between them. Both are technology funds offered by the Vanguard Group. However, while VGT is an exchange-traded fund, VITAX is a mutual fund.
Both funds track the performance of the MSCI US Investable Market Information Technology Index. This market-cap weighted index fund comprises stocks of various companies within the information and technology sector.
It implies that being an ETF, VGT fluctuates and is traded throughout the day. On the other hand, VITAX, a mutual fund, is traded only once a day.
Both funds have a low expense ratio of 0.1%. However, in terms of minimum investments, VGT is pegged at one share, while VITAX requires an initial $100,000 if you want to invest.
While VGT has a dividend yield of 0.61%, VITAX has a dividend yield of 0.66%. Similarly, VITAX has higher net assets of $64.56 billion, while the net assets of VGT are $58.51 billion.
It is important to look at the composition of the two funds and their past performance to assess the differences between VGT and VITAX and determine which fund would fit your situation best.
VGT vs. VITAX: Composition Differences
Since VGT and VITAX are both technology funds, they comprise more or less the same holdings. We have compared the top 10 holdings of the two funds, showing a slight difference between the percentage compositions of the total portfolio.
Here are the top 10 holdings of VGT. These holdings constitute 59.20% of the total assets of VGT.
|S.No||Name||Symbol||Percentage of total assets|
|4||Visa Inc Class A||V||3.28%|
|5||MasterCard Inc Class A||MA||2.95%|
|8||PayPal Holdings Inc||PYPL||2.38%|
|10||Cisco Systems Inc||CSCO||1.74%|
Here are the top 10 holdings of VITAX. It constitutes 60.41% of its total assets.
|S.No||Name||Symbol||Percentage of total assets|
|4||Visa Inc Class A||V||3.44%|
|5||MasterCard Inc A||MA||3.29%|
|8||PayPal Holdings Inc||PYPL||2.40%|
|10||Cisco Systems Inc||CSCO||1.81%|
While the top 10 holdings for VGT and VITAX are similar, the only difference is that the total percentage of these companies is 1.2% more than that of VGT, making VITAX slightly more concentrated than VGT.
Here is a comparison of the sector-wise weightage of the portfolio of VGT and VITAX. For better understanding, we are only including the sectors represented in these two funds and excluded the sectors with zero weightage in the portfolio of both VGT and VITAX.
We can see that the two funds comprise stocks from the same sectors with slight variations in the percentage distribution. VGT has a higher percentage of representation from the technology sector compared to VITAX.
VGT vs. VITAX: Performance Differences
Since both VGT and VITAX are technology-related funds, as an investor, you need to assess how the two funds have performed during the past 10 years. Here is a tabular depiction of the performance and returns of VGT.
Here is the performance analysis for VITAX.
From the above values, we can see that VGT has been performing slightly better compared to VITAX. There is a small difference between the performance of the two funds for the 1-year mark, but the variation lessens when we look at the values for the 5-year and 10-year returns.
VGT vs. VITAX: Fees
As for expense ratios, both VGT and VITAX have 0.1%, which is lower than 82% of funds in the same field. While associated costs are a significant investment consideration, they may not hold much weightage when comparing VGT and VITAX.
However, the important aspect to consider is that VGT is an ETF, and VITAX is a mutual fund and requires an investment of $100,000. So, if you want to invest in mutual funds and have $100,000 to spare for investment, you can consider VITAX.
If you want to go the ETF route, VGT is the obvious choice. VGT has performed slightly better (by 0.35%) than VITAX during the last 10 years.
Frequently Asked Questions (FAQs) – VGT vs. VITAX
Is VGT a Good ETF?
VGT has provided viable profits to investors during the past years and is quite popular among investors seeking to diversify their portfolios and invest in technology funds. With a low expense ratio and strong performance indicators, we can safely assume VGT to be a good ETF.
Is VGT Better Than VITAX?
As an ETF, VGT does not require an initial investment, unlike VITAX. Moreover, VGT has also outperformed VITAX during the past 10 years, making it a better option for investors seeking to invest in technology ETFs.
Conclusion – VGT vs. VITAX
In the comparative analysis of these two Vanguard funds, VITAX is seen as less volatile, being traded only once a day. It also has a higher net asset than VGT and a higher investment requirement of $100,000. However, overall, VGT emerges as the better fund in terms of performance, which is the primary criterion for investment decisions.
At the end of the day, your decision should be based on your portfolio preferences, investment objective and strategy, and financial goals. While weighing your options, keep researching as you continue your journey to financial empowerment through investing.
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Founder of Spark Nomad, Radical FIRE, Journalist
- Expertise: Personal finance and travel content
- Education: Bachelor of Economics at Radboud University, Master in Finance at Radboud University, Minor in Economics at Chapman University.
- Over 200 articles, essays, and short stories published across the web.
Experience: Marjolein Dilven is a journalist and founder of Spark Nomad, a travel platform, and Radical FIRE, a personal finance platform. Marjolein has a finance and economics background with a master’s in Finance. She has quit her job to travel the world, documenting her travels on Spark Nomad to help people plan their travels. Marjolein Dilven has written for publications like MSN, Associated Press, CNBC, Town News syndicate, and more.