If you’re looking for the best ETF to invest in, you might be considering Vanguard Health Care ETF (VHT) or Vanguard Information Technology ETF (VGT).
VGT vs VHT: Both ETFs are popular among investors and have their own benefits and drawbacks.
In this article, we will compare VGT vs VHT to help you make an informed investment decision.
Vanguard Health Care ETF (VHT) is an ETF that invests in healthcare stocks. On the other hand, Vanguard Information Technology ETF (VGT) invests in technology stocks. Both ETFs have a low expense ratio of 0.10%, which is a great advantage for long-term investors. However, there are some differences in their portfolio composition, financial analysis, and risk and performance metrics that you should be aware of before making a decision.
Key Takeaways VGT vs VHT
- VHT invests in healthcare stocks, while VGT invests in technology stocks.
- Both ETFs have a low expense ratio of 0.10%.
- VGT has outperformed VHT over the past ten years, but VHT offers a more diversified portfolio.
Overview of VGT vs VHT
When it comes to investing in sector ETFs, two popular options are the Vanguard Information Technology ETF (VGT) and the Vanguard Health Care ETF (VHT). Both of these ETFs are issued by Vanguard, one of the largest investment management companies in the world.
Vanguard Information Technology ETF (VGT)
The Vanguard Information Technology ETF (VGT) provides exposure to the technology sector of the market. This ETF tracks the performance of the MSCI US Investable Market Information Technology 25/50 Index, which includes companies such as Apple, Microsoft, and Facebook. VGT has a low expense ratio of 0.10% and currently has $44.2B in assets under management.
Investing in VGT can be a good way to gain exposure to the technology sector, which has been one of the best-performing sectors in recent years. However, it’s important to keep in mind that the technology sector can be volatile, and investing in VGT comes with risks.
Vanguard Health Care ETF (VHT)
The Vanguard Health Care ETF (VHT) provides exposure to the health care sector of the market. This ETF tracks the performance of the MSCI US Investable Market Health Care 25/50 Index, which includes companies such as Johnson & Johnson, Pfizer, and UnitedHealth Group. VHT has a low expense ratio of 0.10% and currently has $19.2B in assets under management.
Investing in VHT can be a good way to gain exposure to the health care sector, which is often seen as a defensive sector that can perform well even in times of economic uncertainty. However, it’s important to keep in mind that the health care sector can also be affected by regulatory changes and other factors that can impact the performance of VHT.
In summary, both VGT and VHT are popular sector ETFs that can provide exposure to the technology and health care sectors of the market, respectively. While investing in these ETFs can be a good way to gain exposure to these sectors, it’s important to keep in mind that both come with risks and should be considered as part of a diversified investment portfolio.
Financial Analysis VGT vs VHT
When it comes to comparing VGT and VHT, there are several financial metrics to consider. In this section, we’ll take a closer look at the expense ratio, dividend yield, and historical returns of these two ETFs.
Expense Ratio Comparison
One of the most important things to consider when investing in ETFs is the expense ratio. This is the annual fee that the fund charges to cover its operating expenses. In the case of VGT and VHT, both funds have an expense ratio of 0.10%. This means that for every $10,000 you invest, you’ll pay $10 in fees each year.
Dividend Yield Analysis
Another important factor to consider when investing in ETFs is the dividend yield. This is the amount of money that the fund pays out to investors as a dividend. In the case of VHT, the dividend yield for the trailing twelve months is around 1.50%, which is more than VGT’s 0.70% yield. This means that if you’re looking for income from your investment, VHT may be a better option.
Historical Returns Overview
When it comes to historical returns, VGT has provided 2.62% higher returns than VHT over the past ten years. However, it’s important to note that past performance is not a guarantee of future results. In the past year, VGT has returned 25.72%, while VHT has returned 22.66%. Over the past three years, VGT has returned 28.33%, while VHT has returned 26.03%. Over the past five years, VGT has returned 25.23%, while VHT has returned 20.92%.
Overall, both VGT and VHT are solid ETFs that can provide investors with exposure to the technology and healthcare sectors, respectively. When deciding which one to invest in, it’s important to consider your investment goals and risk tolerance.
Portfolio Composition VGT vs VHT
When comparing VGT and VHT, it’s important to understand the portfolio composition of each ETF. Here are the key factors to consider:
Top Holdings
VGT and VHT have different top holdings. As of November 30, 2023, VGT’s top holdings included Apple Inc., Microsoft Corp., and Amazon.com Inc. On the other hand, VHT’s top holdings included UnitedHealth Group Inc., Merck & Co. Inc., and AbbVie Inc.
Market Capitalization and Diversification
VGT and VHT have different market capitalization and diversification. VGT is focused on the technology sector and is comprised of growth and value stocks of U.S. technology companies. VHT, on the other hand, is focused on the healthcare sector and is comprised of growth and value stocks of U.S. healthcare companies.
VGT and VHT also have different market capitalization. VGT is comprised of large-cap and mid-cap companies, while VHT is comprised of large-cap companies.
Index-Based Management Style
VGT and VHT are both index-based ETFs. VGT tracks the MSCI US Investable Market Information Technology 25/50 Index, while VHT tracks the MSCI US Investable Market Health Care 25/50 Index. Both ETFs use a full replication technique, which means they hold all the securities in their respective indexes.
Overall, the portfolio composition of VGT and VHT is different due to their focus on the technology and healthcare sectors, respectively. It’s important to consider your investment goals and risk tolerance when choosing between the two ETFs.
Risk and Performance Metrics VGT vs VHT
Year-to-Date (YTD) Return
When comparing VGT and VHT, one of the most important metrics to consider is the year-to-date (YTD) return. As of December 9th, 2023, VGT has a YTD return of 21.45%, while VHT has a YTD return of 18.92%. This indicates that VGT has outperformed VHT in terms of returns so far this year.
Risk Assessment
In terms of risk assessment, VGT and VHT have similar standard deviations, with VGT having a standard deviation of 22.36% and VHT having a standard deviation of 22.39%. However, when looking at alpha, which measures a fund’s performance relative to its benchmark, VGT has a higher alpha of 0.66 compared to VHT’s alpha of 0.49. This suggests that VGT has been able to generate higher returns than its benchmark index compared to VHT.
When it comes to the Sharpe ratio, which measures a fund’s risk-adjusted returns, VGT has a higher Sharpe ratio of 1.09 compared to VHT’s Sharpe ratio of 0.98. This indicates that VGT has been able to generate higher returns for the level of risk it has taken on compared to VHT.
Beta is another important metric to consider when assessing risk. VGT has a beta of 1.09, while VHT has a beta of 0.85. This suggests that VGT is more volatile than VHT and has a higher sensitivity to market movements.
Finally, it is important to consider the correlation between the two funds. VGT and VHT have a high correlation of 0.96, indicating that they tend to move in the same direction.
Overall, while VGT has outperformed VHT in terms of YTD return and has a higher alpha and Sharpe ratio, it also has a higher beta and is more volatile. It is important to consider your investment goals and risk tolerance before making a decision between these two funds.
Investor Considerations
When deciding between VGT and VHT, there are several factors that an investor should consider. In this section, we will explore some of the most important considerations.
Market Trends and Economic Factors
One of the most important considerations when investing in VGT or VHT is the current market trends and economic factors. The technology sector has been performing well in recent years, with many experts predicting continued growth in the sector. On the other hand, the healthcare sector is also expected to grow, but at a slower pace than the technology sector.
It is important to note that both VGT and VHT are exposed to the public equity markets, which can be volatile and subject to sudden changes. Therefore, it is important to carefully monitor market trends and economic factors before making an investment decision.
Health Care vs. Technology Sector Outlook
Another important consideration when choosing between VGT and VHT is the outlook for the healthcare and technology sectors. The healthcare sector is generally considered a defensive sector, meaning that it is less sensitive to economic cycles. This can make VHT a good choice for investors who are looking for a stable, long-term investment.
On the other hand, the technology sector is generally considered a growth sector, meaning that it is more sensitive to economic cycles. This can make VGT a good choice for investors who are looking for a more aggressive, high-growth investment.
It is also important to consider the current valuations of the healthcare and technology sectors. While both sectors have historically traded at a premium to the broader market, the technology sector is currently trading at a higher valuation than the healthcare sector.
In conclusion, when choosing between VGT and VHT, it is important to consider market trends and economic factors, as well as the outlook for the healthcare and technology sectors. By carefully weighing these factors, you can make an informed investment decision that aligns with your investment goals and risk tolerance.
