Tech ETFs: Why These Two Vanguard Funds Crushed the Market in Five Years

Exchange-traded funds offer a pathway to stable, long-term wealth building—yet not every tech etfs option delivers equal results. The Vanguard Information Technology Index Fund ETF (NYSEMKT: VGT) and Vanguard Growth Index Fund ETF (NYSEMKT: VUG) stand as compelling examples of how strategic sector exposure can substantially outpace broader market benchmarks. Both have more than doubled investor wealth over the past five years, but they take distinctly different routes to get there.

Performance Gap: Tech Focus vs. Diversified Growth

The divergence in returns between these tech etfs tells an instructive story. The Vanguard Information Technology Index Fund has climbed approximately 135% over five years—reaching roughly 141% when dividend reinvestment is factored in. This substantially exceeds the S&P 500’s total return of 109% during the same window.

The Vanguard Growth Index Fund, while still impressive, posted more modest outperformance. Its broader composition across 166 holdings means it captures growth opportunities beyond pure technology, yet this diversification comes with a tradeoff in explosive returns. Consumer discretionary represents 19% of its portfolio, with industrials claiming close to 10%, which moderates overall gains compared to its tech-focused cousin.

Inside the Portfolios: What’s Driving These Tech ETFs

Vanguard Information Technology Index Fund maintains exposure to over 300 technology companies spanning semiconductors, application software, electronics, and adjacent sectors. The outsized performance reflects years of sustained momentum in artificial intelligence, cloud computing, and digital infrastructure investment. Apple, Microsoft, and Nvidia collectively control nearly 46% of the fund’s assets, yet this concentration reflects their dominance in shaping tech sector performance broadly.

The fund’s 0.09% expense ratio keeps cost drag minimal—a critical factor when compound returns matter. Most individual holdings represent less than 4% of total assets, providing breadth while maintaining top-tier positioning in industry leaders.

Vanguard Growth Index Fund takes a gentler approach with 166 concentrated positions rather than blanket tech sector coverage. Here, the “big three” tech stocks account for around 31% of holdings, allowing meaningful exposure to other growth vectors. Its 0.04% expense ratio edges lower, rewarding cost-conscious investors.

The AI Tailwind and Ongoing Opportunity

Recent years have benefited from explosive artificial intelligence adoption and upgrades across enterprise infrastructure. This secular trend isn’t isolated to pure-play AI companies but extends across the entire technology ecosystem—a dynamic particularly advantageous for broad-based tech etfs like VGT. As companies allocate budgets toward next-generation technologies and legacy system replacements, the entire sector benefits.

The Vanguard Information Technology Index Fund captures this momentum directly. Its 300+ holdings mean that whether growth comes from chipmakers enabling AI, software vendors powering automation, or component suppliers scaling output, the fund participates broadly.

Risk Profile and Investor Suitability

Volatility remains the price of admission for concentrated tech exposure. The Vanguard Information Technology Index Fund delivers superior absolute returns but with higher equity risk. Investors comfortable weathering tech sector cycles—including pullbacks that occasionally see valuations compress sharply—find this exposure worthwhile.

The Vanguard Growth Index Fund appeals to those seeking growth without placing all eggs in one sector basket. With consumer discretionary and industrial holdings representing 29% of assets combined, portfolio volatility tends to moderate during periods when tech faces headwinds. This structural diversification translates to potentially lower portfolio drawdowns over market cycles.

Long-Term Conviction: Why These Tech ETFs Remain Relevant

Five-year performance attracts attention, but the real question concerns the decade ahead. Artificial intelligence infrastructure investment shows no signs of decelerating. Enterprise spending cycles typically run multi-year, ensuring sustained capital deployment into tech-adjacent upgrade cycles.

The Vanguard Information Technology Index Fund’s massive Apple, Microsoft, and Nvidia positions underscore a fundamental truth: leadership in technology perpetually concentrates around companies with superior moats, scale advantages, and technological depth. Their continued centrality to enterprise computing, consumer devices, and data center infrastructure suggests their outperformance likely continues.

Meanwhile, the Vanguard Growth Index Fund’s more balanced approach appeals to investors who want growth exposure without betting the portfolio entirely on tech sector continuation. Its lower expense ratio (0.04% vs. 0.09%) compounds these advantages for buy-and-hold strategies spanning decades.

The Bottom Line for Tech ETFs

Choosing between these funds depends less on pure performance metrics and more on personal risk tolerance and conviction around tech sector leadership. Pure tech enthusiasts find the Vanguard Information Technology Index Fund compelling—direct, concentrated exposure to the sector likely to drive returns for the next five years. Risk-averse growth investors prefer the Vanguard Growth Index Fund’s combination of growth orientation, sector diversification, and ultra-low fees.

Both vehicles have demonstrated capacity to substantially exceed market returns. The question is whether your portfolio construction benefits from maximum tech emphasis or prefers the balanced approach these tech etfs each represent.