VGT vs. XLK: Which Broad Tech ETF Is the Better Buy Right Now?

The State Street Technology Select Sector SPDR ETF (XLK 0.82%) and the Vanguard Information Technology ETF (VGT 0.89%) are both designed to give investors exposure to the U.S. technology sector, tracking similar slices of the market.

This comparison examines their costs, performance, risk, and portfolio makeup to help clarify which ETF may appeal to you based on your priorities.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months.

XLK charges a slightly lower fee at 0.08% compared to VGT’s 0.09%, making it a touch more affordable. XLK also offers a marginally higher dividend yield, which may appeal to those seeking a modest income component.

Performance & risk comparison

What’s inside

VGT seeks to track the performance of the U.S. information technology sector, using both full replication and sampling strategies. With 320 holdings, it offers broad exposure to technology and spans subsectors like electronics, software, and semiconductors. Its largest positions include Nvidia, Apple, and Microsoft.

XLK, by contrast, is more concentrated, holding 71 technology-focused stocks. Its top three holdings match those of VGT, but the fund is more selective in its sector coverage.

For more guidance on ETF investing, check out the full guide at this link.

What this means for investors

XLK and VGT are both tech-focused ETFs that hold stocks from all corners of the industry. The primary difference between them is their level of diversification.

VGT holds about 4.5 times as many stocks as XLK, but it also allocates a larger share of assets to its top three holdings. While the two funds share the same top three stocks, they account for 43.32% of VGT’s portfolio, compared to 37.91% for XLK.

In other words, while VGT is broader in terms of the number of holdings, it’s slightly more concentrated on mega-cap tech stocks. If Nvidia, Apple, or Microsoft significantly over- or underperform, it could affect VGT more than XLK.

While XLK has outperformed VGT in both one- and five-year total returns, VGT’s broader reach provides greater exposure to the tech sector. VGT may be a good fit for those seeking broad access to as many tech stocks as possible, while investors looking for a narrower portfolio with slightly less exposure to mega-cap names might prefer XLK.