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This Vanguard ETF Has Generated 620% Returns in 10 Years. Is It Still a Buy?
If you’re not sure where to invest in the stock market, you should consider holding an exchange-traded fund (ETF) in your portfolio. Doing so can drastically simplify your decision-making process. ETFs hold dozens, hundreds, and sometimes even thousands of stocks. They can give you some excellent exposure through just a single investment. Vanguard funds, in particular, are popular choices due to their low fees and solid stock selection.
In some cases, you can also achieve considerable returns from investing in ETFs. One exceptional example is the Vanguard Information Technology Index Fund ETF (NYSEMKT: VGT), which has generated some significant returns for investors in the past decade. Can it still be a good investment today?
The Vanguard Information Technology ETF is up 620% in 10 years
A big reason the Vanguard Information Technology fund has been a phenomenal investment to own over the past decade is because it focuses on top tech stocks, including big names such as Apple, Microsoft, and Nvidia — three companies that are benefiting from the excitement over artificial intelligence (AI) in recent years. Together, those three stocks account for 44% of the fund’s total weight. Overall, there are 316 stocks in the ETF.
When including the ETF’s dividend (it yields a modest 0.6%), its total returns over the past 10 years come in at around 620%. That means a $25,000 investment in the fund then would be worth approximately $180,000 right now. In comparison, if you made the same size investment mirroring the S&P 500, it would be worth considerably less today, totaling around $94,000.
Why the fund can still rally higher
As well as the ETF has performed over the past decade, there’s still a bullish case to be made for investors who are contemplating the fund, which is due to the potential in AI.
Research company Gartner projects that AI chip sales will total at least $119 billion by 2027, which is more than double the $53 billion it totaled just last year. That’s good news for Nvidia and other chipmakers, as it suggests demand will remain strong. The overall AI market is also looking promising. Analysts from Fortune Business Insights estimate that globally, it will grow at a compound annual growth rate of 20.4% until 2032.
While the Vanguard fund isn’t exclusively an AI fund, tech stocks as a whole will benefit from businesses building AI models and related products and services. Companies will invest in new AI technologies, and they will need to upgrade their existing IT infrastructure to help ensure they have the capabilities to handle the added workloads. Many tech companies are at least indirectly involved with AI in some way, even if they aren’t creating AI-specific products and services.
Should you invest in the Vanguard Information Technology ETF?
The Vanguard Information Technology ETF has a modest expense ratio of 0.10%, and it offers investors a great way to gain exposure to the best tech stocks in the world.
Given the soaring valuations in tech, investors may feel uneasy about investing in this type of fund. But while there may be a correction in the cards for some highly priced tech stocks in the near future, the long-term trajectory still looks promising. Tech has, for the most part, been a great option for long-term investors, and it has allowed investors to generate some incredible returns along the way.
As long as you plan to stay invested for years, this Vanguard fund can be a great investment to hold in your portfolio.
Should you invest $1,000 in Vanguard World Fund – Vanguard Information Technology ETF right now?
Before you buy stock in Vanguard World Fund – Vanguard Information Technology ETF, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard World Fund – Vanguard Information Technology ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $845,679!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of October 14, 2024
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. The Motley Fool recommends Gartner and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
This Vanguard ETF Has Generated 620% Returns in 10 Years. Is It Still a Buy? was originally published by The Motley Fool
Sales of existing homes fell in September as house hunters remained on the fence about buying a home despite mortgage rates easing during the month.
Existing home sales slipped 1.0% from August’s tally to a seasonally adjusted annual rate of 3.84 million, the National Association of Realtors said Wednesday. That marked the lowest rate since October 2010. Economists polled by Bloomberg expected a pace of 3.88 million in September.
On a yearly basis, sales of previously owned homes were 3.5% lower in September. The median home price rose 3.0% from last September to $404,500, marking the 15th consecutive month of annual price increases.
“Home sales have been essentially stuck at around a 4 million-unit pace for the past 12 months,” NAR chief economist Lawrence Yun said in a press release.
There have been significant challenges that have weighed on sales activity, including a lack of inventory, escalating prices, and elevated mortgage rates. Last month, however, those factors turned around.
The Federal Reserve cut its benchmark rate by half a percentage point in September. While the central bank doesn’t set mortgage rates, its actions influence their direction of movement.
Mortgage rates hit the lowest level since February 2023 ahead of the Fed decision to ease, while listing inventory picked up.
But overall, that hasn’t been enough to entice buyers.
“Some consumers are hesitating about moving forward with a major expenditure like purchasing a home before the upcoming election,” Yun said.
Tesla (TSLA) reported mixed third quarter results after the bell on Wednesday, but the stock jumped in after-hours trading as investors cheered the earnings beat, higher gross margins, and news that Tesla’s cheaper EV is on track for production next year.
For the quarter, Tesla reported revenue of $25.18 billion vs. $25.4 billion per Bloomberg consensus, higher than the $25.05 billion it reported in Q2 and also topping the $23.40 billion Tesla reported a year ago. Tesla posted adjusted EPS of $0.72 vs $0.60 expected, on adjusted net income of $2.5 billion and free cash flow of $2.9 billion.
The closely watched gross margin figure came in at 19.8%, much higher than the 16.8% expected.
Tesla shares were up nearly 8% in after hours trade.
“We delivered strong results in Q3 with growth in vehicle deliveries both sequentially and year-on-year, resulting in record third-quarter volumes,” the company said in its earnings deck. “Preparations remain underway for our offering of new vehicles — including more affordable models — which we will begin launching in the first half of 2025.”
Earlier this month, Tesla (TSLA) announced third quarter deliveries that slightly missed expectations, sending the stock lower.
Tesla said it delivered 462,890 vehicles in Q3, up 6.4% quarter over quarter, to mark the first quarter of delivery growth this year. The numbers also came in ahead of the 435,059 EVs the company delivered in the year-ago period. But Wall Street had expected Tesla to deliver closer to 463,897, according to Bloomberg.
“Refreshed Model 3 ramp continued successfully in Q3 with higher total production and lower cost of goods sold quarter-over-quarter. Cybertruck production increased sequentially and achieved a positive gross margin for the first time,” Tesla said in its report.
Tesla said it expects vehicle deliveries to achieve “slight growth” in 2024.
Ahead of Tesla’s Q3 disclosure, shares were down approximately 11% since Tesla revealed its robotaxi, dubbed the Cybercab, at its showy “We, Robot” event from the Warner Bros. studio lot in Burbank, Calif., on Oct. 10.
The debut and release of a cheaper EV is what many analysts and industry watchers believe will spur the next leg higher of EV sales, as even CEO Elon Musk has said before. During its Q2 report, Tesla and Musk said the company remains on track for the production of new vehicles, likely including a cheaper EV, in the first half of next year.
Investors and analysts were left wanting more details from Tesla’s “We, Robot” event on the Cybercab itself and detailed testing plans, along with questions about the development of Tesla’s sub-$30,000 EV, dubbed the Model 2.
Transak disclosed a data breach affecting over 92,000 users after a phishing attack compromised an employee’s laptop.
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The Dow plummets more than 600 points and is on track for its worst day in more than a month
The Dow Jones Industrial Average and other major indexes suffered a steep decline Wednesday afternoon as the yield on the benchmark 10-year U.S. Treasury note continued its upward climb, reaching 4.23%—a level not seen since July.
In the afternoon, the Dow dropped 631 points, or 1.4%, heading for its worst day in over a month. Meanwhile, the tech-heavy Nasdaq and the S&P 500 declined by 2.2% and 1.4%, respectively. However, there was some relief for investors as oil prices eased, with West Texas Intermediate (WTI) futures trading around $70.65 per barrel.
The Federal Reserve’s Beige Book, released in the afternoon, reported that economic activity remained largely unchanged across the 12 Federal Reserve Districts, with the Southeast significantly impacted by a harsh storm season.
On Wednesday, all eyes are on Tesla (TSLA) as the company prepares to release its latest earnings report. Analysts expect earnings per share to be 60 cents, down from 66 cents a year ago but an improvement from 52 cents in the previous quarter, according to FactSet estimates. Revenue is projected to hit $25.4 billion, compared to $23.3 billion in the third quarter of 2023 and $25.5 billion in the preceding quarter.
Apart from Tesla, investors are closely monitoring earnings reports from other major corporations, including AT&T (T), Boeing (BA), and Coca-Cola (KO).
McDonald’s stock plunges over 5%
McDonald’s (MCD) shares took a sharp hit, falling over 5% after the Centers for Disease Control and Prevention (CDC) linked the chain’s Quarter Pounder burgers to an E. coli outbreak. The outbreak has led to 10 hospitalizations and one death, driving a significant decline in McDonald’s stock during the afternoon trading session.
As of now, 49 cases have been reported across 10 states between Sept. 27 and Oct. 11, with a majority of illnesses occurring in Colorado, Nebraska, Utah, and Wyoming. The CDC noted that most of those affected had eaten a Quarter Pounder. Investigators are working swiftly to identify the contaminated ingredient.
Spirit Airlines stock soars 30%
After a failed attempt at merging with JetBlue (JBLU-0.80%), ultra-low-cost carrier Spirit Airlines (SAVE+28.01%) is reportedly turning back to a familiar partner. The Wall Street Journal (NWSA-0.34%), citing people familiar with the matter, reports that Spirit and Frontier Airlines (ULCC+3.05%) are in early talks over a potential merger. The news sent Spirit’s stock soaring nearly 30% on Wednesday.
–Francisco Velasquez and Rocio Fabbro contributed to the article
The semi-autonomous region of Tanzania is taking advantage of a sandbox regulatory framework adopted in July.
Bitcoin’s correction ignited selling in altcoins, which are slipping below critical support levels.
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