The Three-Headed Dragon You're Actually Buying
Every time I log on, some fresh-faced finance guru on YouTube is screaming about the "one simple trick" to get rich. Their secret weapon? Usually, it's an ETF. And lately, the golden child is the Vanguard Information Technology ETF, or VGT. The pitch is seductive: buy one thing, own the entire tech sector, and ride the wave of innovation straight to your private island. They flash the numbers—20% average annual returns for 15 years—and tell you to just set it and forget it.
Give me a break.
Let's be brutally honest about what VGT is. It’s not some magical, diversified basket of America’s technological prowess. It’s a bet. A massive, top-heavy, dangerously concentrated bet on three companies: NVIDIA, Microsoft, and Apple. A quick look at Vanguard’s Information Technology Index Fund ETF Shares (VGT) Top 25 Holdings shows these three behemoths make up nearly 45% of the entire fund.
Forty. Five. Percent.
Buying VGT is like ordering a "gourmet fruit salad" and getting a bowl that's half apples, with a few grapes and a sad-looking melon ball thrown in for appearances. You think you’re buying into the future of 300+ tech companies, but you’re really just hitching your entire wagon to a three-headed dragon. If any one of those heads gets chopped off—by regulators, by a catastrophic product flop, by simple market gravity—what do you think happens to your "diversified" fund?
Are we really supposed to believe that these three companies, already valued in the trillions, will continue to grow at the same breakneck pace for another decade? At some point, the law of large numbers has to kick in, right? This ain't a bet on innovation; it's a bet that the three kings will never be deposed.
The Illusion of 'Effortless' Wealth
The sales pitch hinges on past performance. Look at those charts! VGT crushed the S&P 500! And yeah, the numbers don't lie. The fund has delivered spectacular returns.
But that was a specific era. An era of near-zero interest rates, unchecked tech expansion, and the meteoric rise of the very companies that now dominate this ETF. VGT’s performance is undeniable. No, wait—its past performance is undeniable. The future is a whole different beast, and betting on a repeat performance feels less like a strategy and more like wishful thinking. It’s a bet on the past, plane and simple.
I see stuff like this, and it reminds me of the late '90s. Back then, you just had to own Cisco or Intel. They were the "can't lose" stocks powering the new digital world. People stopped doing their homework because the answer seemed so obvious. We all know how that story ended. Today, the names have changed, but the blind faith feels eerily familiar. Everyone's just piling in, assuming the party will never stop.
And while everyone is hypnotized by VGT, you’ve got active funds like GTEK trying to find the next NVIDIA, not just ride the current one. Now, I’m not shilling for Goldman Sachs—their 0.75% fee is absurd—but the concept is what matters. At least they’re trying to find disruptive companies before they’re household names. They’re doing the work. VGT, by its very design, is a passive follower. It’s the investing equivalent of showing up to the victory parade after the game is already over. If you really think the next decade of tech growth is going to come from the exact same players that dominated the last one, then...
So, What's the Real Bet Here?
Let’s stop pretending VGT is a sophisticated play on the "information technology sector." It's not. It’s a momentum-chasing tool for people who want exposure to Big Tech's biggest names without the hassle of buying three individual stocks. It's a convenience product. It’s the frozen pizza of investing portfolios. It’ll feed you, but don't you dare call it cooking. You're not an innovator or a savvy tech investor for buying it. You’re just a passenger on a very crowded, top-heavy ship, hoping it doesn't hit an iceberg.
Tags: vgt