The One Vanguard ETF I'm Increasing My Investment In for 2025

Choosing the right investment can significantly enhance your portfolio, and exchange-traded funds (ETFs) offer an effortless method to grow your wealth.

An ETF serves as a collection of securities bundled together into a single fund, allowing you to make a single investment that instantly exposes you to numerous stocks. For those who may not have the time for extensive research or prefer a low-maintenance investment, ETFs can help create a diversified portfolio with minimal effort compared to buying individual stocks.

With so many ETFs available, selecting the right one depends on your financial objectives and personal preferences. However, one exceptional ETF that I plan to invest more in for 2025 is the Vanguard Information Technology ETF.

A Powerhouse in Technology to Boost Your Savings

The Vanguard Information Technology ETF focuses specifically on the technology sector and includes a broad range of 314 stocks within this field.

This fund is predominantly made up of significant names in tech, with its three largest holdings—Apple, Nvidia, and Microsoft—accounting for nearly 45% of the total fund assets. The remaining 311 stocks contribute to a smaller share of the ETF.

This combination of established industry giants and smaller firms offers a balanced approach to risk and reward. Investing in this ETF allows you to participate in the successes of tech leaders like Apple and Nvidia while enjoying the diversification that comes with owning hundreds of stocks in one fund.

If your goal is to gain exposure to the tech sector with minimal effort, this ETF may be an excellent choice. This industry, in particular, has played a crucial role in overall market performance, driving much of the gains seen in recent years.

For instance, over the past decade, the Vanguard Information Technology ETF has provided an average annual rate of return of 20.59%. With this rate, a monthly investment of $200 could potentially grow to over $1.2 million after 25 years.

Considerations Before Investing

One significant risk associated with investing in a tech-centric ETF is the volatility inherent in this industry. Tech stocks can yield impressive returns during strong market periods, but downturns can also be particularly sharp.

For example, during the bear market from January to October in 2022, the S&P 500 dropped around 25%, while the Vanguard Information Technology ETF experienced a steeper decline of nearly 35% during the same timeframe.

However, periods of market upswings often compensate for the downturns experienced. Since the new bull market began in October 2022, the ETF has risen by 114%, outpacing the S&P 500's 70% gain.

Even though past performance is not indicative of future returns, it's essential to prepare for the possibility of lower returns when investing in more volatile assets. You should be ready to weather potential declines before witnessing potential rebounds.

Safeguarding Your Portfolio

If you decide to invest in the Vanguard Information Technology ETF, ensuring that your overall portfolio is well diversified is crucial. Concentrating solely on the tech sector significantly increases your risk level, so it's advisable to also invest in various other industries to mitigate volatility.

This could involve investing in broader market funds, such as an S&P 500 ETF or a total stock market ETF, to gain exposure across multiple sectors. Alternatively, you could build a customized portfolio that includes individual stocks from other industries.

If you are willing to accept a slightly higher risk for the potential of superior returns, the Vanguard Information Technology ETF may be an excellent investment as we move into 2025. When included in a well-balanced portfolio, it could significantly enhance your investment earnings with minimal effort required on your part.

ETF, Investment, Technology