With the Nasdaq getting rattled today, many investors are looking at the Vanguard Information Technology ETF (VGT) to see what technology stocks have been affected.
VGT seeks to track the performance of a benchmark index that measures the investment return of stocks in the information technology sector. The fund is passively managed, using a full-replication strategy when possible and a sampling strategy if regulatory constraints dictate. VGT includes stocks of companies that serve the electronics and computer industries or that manufacture products based on the latest applied science.
The ETF aims to track the performance of the MSCI US Investable Market Index/Information Technology 25/50, an index made up of stocks of large, mid-size, and small U.S. companies within the information technology sector, as classified under the Global Industry Classification Standard. The Advisor attempts to replicate the target index by seeking to invest all, or substantially all, of its assets in the stocks that make up the index, in order to hold each stock in approximately the same proportion as its weighting in the index. It is non-diversified.
VGT has a concentrated portfolio. Its top 5 holdings represent about 42% of its total portfolio. This concentration can introduce significant risk especially if one or a few of these stocks performs poorly, as some of the major tech stocks have done today. Apple is down based on regulatory concerns that began last week.
In a report on Thursday about concerns facing Amazon, D.A. Davidson analysts highlighted “the potential for antitrust and regulation across the globe” as a barrier to future expansion. The U.S. represents only the latest concern.
“Additionally, foreign governments are also realizing the dangers of allowing a few tech titans to have such enormous influence on consumer’s day-to-day lives, including not only Amazon, but also Apple, Facebook, and Google and the potential for regulatory disruption is increasing by the day, in our view, and, therefore, is something we are monitoring closely,” the report said.
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