FTEC vs VGT
FTEC vs VGT, or the Fidelity MSCI Information Technology ETF and the Vanguard Information Technology Index Fund ETF, are both ETFs that specialize in the investment of stocks related to technology.
They do this by attempting to trace the performance of the MSCI US Investable Market Index/Information Technology 25/50. This is an index that is made up of U.S. companies of varying sizes, all of which are classified as being in the information technology sector.
Because FTEC vs VGT both track the same index, there is a large amount of overlap between the two ETFs. The main difference is that they are held by different investment firms which may manage them slightly differently as time progresses.
In order to determine which is the best for you, we must look at the holdings of FTEC vs VGT, and also the small differences that stem from those holdings.
FTEC vs VGT: Comparison
FTEC vs VGT: Holdings
FTEC vs VGT have almost identical holdings. At the time of writing in August 2022, FTEC has 392 total holdings, while VGT has 393. They have 348 overlapping holdings. The highest percentage holdings in both is Apple Inc. (AAPL), with FTEC at 24.09% and VGT at 22.94%. The second largest is also identical, Microsoft Corp. (MSFT) with FTEC at 18.16% and VGT at 18.8%.
These are both absurd quantities for any single holding in an ETF, and is the reason why both FTEC vs VGT face large criticisms regarding diversification, although it is not unusual in technology ETFs at all. Another, very popular, technology EFT, Technology Select Sector SPDR Fund (XLK), has roughly 24.5% AAPL and 22.39% MSFT.
The biggest difference in the holdings between FTEC vs VGT is in the quantity, rather than the proportions. FTEC is a lot smaller with only $3.78 Billion, while VGT has roughly $33.6 Billion in assets. This difference in size can partially be attributed to the age of the ETFs, with VGT being slightly older, and the size of Vanguard as opposed to Fidelity.
Because of these similarities in holdings, it is definitely not necessary to own both, purely for the purpose of portfolio diversification.
FTEC vs VGT: Risk
One way of determining risk is to determine the volatility of an ETF. Due to the similarities in holdings, the overall volatility of FTEC vs VGT are very similar. At this moment, the volatility of FTEC is approximately 28.79% and the volatility of VGT is estimated at 29.80%.
Although VGT has a slightly higher volatility, this is also indicative of possible reward, but the increased drawdown that could result from it should be heavily considered.
The Technology Sector has historically proven to be rather profitable, but it is important to remember that historical growth is not always an accurate indication of the future.
FTEC vs VGT: Performance
Historically, the performance of FTEC vs VGT has been pretty similar, as can be seen on the graph below where the growth of FTEC (Blue) and VGT (Orange) over the past five years can be seen.
Over the past five years VGT has grown by 154.55%, while FTEC has grown by 147.98%. Due to the similarities in their holdings, they both tend to experience growth and drawbacks at the same time. As mentioned above, this is to be expected.
FTEC vs VGT: Cost
The cost of FTEC vs VGT is very similar, but it is important to take note of even the smallest difference as this can add up over time, especially if you think you may keep the ETF in your portfolio for many years to come.
FTEC is slightly cheaper with an expense ratio of 0.08%, meaning for every $100 you own, you will need to pay 8 cents per annum. VGT has a greater expense ratio at 0.10%.
FTEC vs VGT: Dividend Income
Dividend income is important to take into account, as it can largely offset cost. In the case of FTEC, it has an annual dividend yield of 0.80%. And has hovered around 1% for more than five years. This is more than enough to compensate for the cost of owning the ETF.
On the other hand, even though VGT also has an annual dividend yield of 0.8%, this is not enough to offset the cost.
However, the growth in total dividend yield of VGT is higher than that of FTEC.
FTEC vs VGT: Conclusion
When it comes down to it, FTEC vs VGT are both very similar due to the fact that they track the same index. This overlap means that their growth is much the same. Which is better for your portfolio will depend on how long you intend to hold your position, and which brokerage account you are using.
Both these funds are large, but because VGT is far larger than FTEC, it may be the better option if you are uncertain about the holding period. This is because the large availability of the ETF makes it more likely that there is someone who wants to buy or sell at a given time, making it easier to purchase or sell your own shares at any given time. Of course, this depends greatly on your brokerage too.
Likewise, in cases where only a single Vanguard ETF is involved, it might be cheaper to purchase the stock initially if you trade through a Vanguard account. In some cases, other accounts may have far higher fees. This is also determined by the quantity that you intend to purchase.
Additionally, VGT costs a lot more than FTEC. This is important to take into account. Some retail traders may not want to put more than $370 into a single ETF, as this would not serve to diversify their smaller portfolio. In this case the estimated $110 of FTEC might make it the better choice.
Regardless of whether you decide FTEC vs VGT is for you, remember that past success is not a prediction of the future. Risk management is of the utmost importance if you intend to trade responsibly, regardless of how high or low risk you deem an asset.
You might me also interested in SPLG vs SPY and ICLN vs QCLN energy ETFs.