Key insights
- The article suggests the Vanguard Growth ETF (VUG) as a low-cost entry point for investors seeking exposure to the tech sector's potential turnaround. While not a pure-play tech ETF, tech comprises nearly 66% of VUG, offering diversification within the sector and exposure to leading tech companies. The ETF's low expense ratio and historical outperformance relative to the S&P 500 are highlighted as attractive features. However, investors should be aware of the inherent volatility of tech and growth stocks.
There's no doubt that the tech sector had a rough first few months of 2026. Over the first three months, the tech sector was the worst-performing S&P 500 sector by a considerable margin. However, things have reversed course for the better in April.
From April 1 to April 21, tech has been the best-performing S&P 500 sector, up over 15%. The sector's volatility will likely continue (especially as key earnings approach), but if you're looking for a low-cost way to gain exposure to the tech world, the Vanguard Growth ETF (VUG +1.48%) is a good option.
It covers a lot of ground, and its 0.03% expense ratio is one of the lowest in the stock market.
VUG isn't a pure-play tech exchange-traded fund (ETF) that only holds tech companies, but the tech sector accounts for nearly 66% of the fund. That's more than 4 times the representation of the second-most-represented sector, consumer discretionary (16.2%).
The ETF is weighted by market cap, so most of its top holdings are big tech companies, including nine of the top 10 holdings:
If you're investing in tech, these are companies that you want in your portfolio. Instead of having to pick a "winner" (especially as it pertains to the current artificial intelligence gold rush), you can bank on big tech as a whole continuing to grow and be dominant.
With just these holdings, you have the largest cloud providers, a large percentage of enterprise software, providers of AI hardware powering the AI boom, digital advertising giants, companies dealing with robotics, and plenty of others.
And whenever the tech sector hits a slump, you have other sectors in the ETF to pick up some of the slack and cushion the blow.
Since it hit the market in January 2004, VUG has experienced lots of volatility and wild swings. It's the nature of the stock market in general, especially tech and growth stocks, where many investments are based on potential and future earnings.
Still, VUG has comfortably outperformed the S&P 500 in that time, up 886% versus the index's 511%. A lot of the separation has come in the past five years, with the surge in big tech valuations. However, VUG's outperformance has been consistent, with better annual returns in 17 of 22 full years.
When you invest in VUG, you should expect high volatility, especially given how much control the tech sector alone has over it. Your job is to expect it, continue investing, and trust that it delivers good long-term returns. So far, it hasn't disappointed from that standpoint.