The technology sector is booming right now, largely due to the monumental growth of artificial intelligence (AI). But picking long-term tech winners is notoriously difficult, and it can be safer to spread your money out among many companies.
That's what makes buying a technology exchange-traded fund (ETF) a good idea. You'll be invested in a variety of leading tech players and benefit regardless of who dominates. You can also invest just $100, or even less, depending on which brokerage you use.
If this sounds appealing to you, here's why buying the Vanguard Information Technology ETF (NYSEMKT: VGT) is a great place to put your money right now.
Tech will likely dominate the market's returns for years to come
The Vanguard Information Technology fund spreads its investment across 300 small- and large-cap technology companies, tracking the MSCI US Investable Market Information Technology 25/50 Index. This provides investors with exposure to a range of top semiconductor and software companies, including Nvidia and Microsoft.
The fund currently has more than 51% of its holdings in semiconductor and software companies, with the remainder comprising tech hardware, application software, communications equipment, and other related industries. Not only is this significant diversification, but because the fund is invested in both large and small-cap companies, you won't miss out on owning rising disruptors in the industry.
It is also important to note that technology stocks have been a dominant force in the stock market's rise, essentially since the 1990s. The AI boom is the latest iteration of technology's influence on the market, and there's no end in sight for the influence of technology stocks.
The result has been very positive for investors who own the Vanguard Information Technology ETF. The fund has had an average annual return of 14.4% since its inception in 2004.
Of course, there's no guarantee it will continue at that pace. Still, it's an indicator of how well the fund can perform when technology companies are benefiting from long-term opportunities, such as the early days of the internet, mobile devices, and now AI.