1 Unstoppable Vanguard ETF I'm Stocking Up On in 2025

The right investment can supercharge your portfolio, and exchange-traded funds (ETFs) can be a simple way to generate wealth with next to no effort.

An ETF is a basket of securities grouped into a single fund, meaning you can instantly invest in dozens of stocks with just one investment. Whether you're short on time or are simply looking for a low-maintenance way to invest, opting for ETFs can help build a diversified portfolio with far less effort than buying individual stocks.

There are countless ETFs to choose from, and the right option for you will depend on your goals and individual preferences. But there's one powerful ETF I'm stocking up on in 2025 and beyond: the Vanguard Information Technology ETF (NYSEMKT: VGT).

A tech powerhouse to supercharge your savings

The Vanguard Information Technology ETF is a tech-specific fund containing 314 stocks from all corners of the technology industry.

This fund is heavily focused on major players in the tech sector, with its three largest holdings (Apple, Nvidia, and Microsoft, respectively) making up close to 45% of the entire fund. The other 311 stocks, then, each make up a much smaller percentage of the ETF.

This mix of industry leaders with smaller corporations can help balance risk and reward. You'll gain a stake in tech titans like Apple and Nvidia, but you can also take advantage of the diversification perks of investing in hundreds of stocks at once.

If you're looking for a way to buy into the tech sector with less effort, this ETF could be a smart option. This industry, specifically, has had an enormous impact on the market overall, accounting for much of the gains we've seen in recent years.

In fact, over the last 10 years, the Vanguard Information Technology ETF has earned an average rate of return of 20.59% per year. At that rate, if you were to invest, say, $200 per month, you could accumulate more than $1.2 million after 25 years.

One major risk to consider before you buy

Perhaps the biggest risk with investing in a tech-focused ETF is that this industry tends to be more volatile than more established sectors of the market. The tech field often experiences explosive returns when the market is thriving, but the downturns tend to be more severe, too.

Case in point: During the last bear market between January and October 2022, the S&P 500 (SNPINDEX: ^GSPC) fell by around 25%. The Vanguard Information Technology ETF, though, dropped by nearly 35% in that time.

^SPX data by YCharts.

Again, though, the good times can often make up for these slumps. Since the new bull market began in October 2022, this ETF is up by 114% compared to around 70% for the S&P 500.

^SPX data by YCharts.

Of course, nobody knows whether these returns will stay consistent going forward, and there's always a chance this ETF may not beat the market at all. But when you're investing in more volatile funds, be prepared to ride out lower lows before you reach the higher highs.

The easiest way to protect your portfolio

If you do choose to invest in the Vanguard Information Technology ETF, it's wise to double-check that the rest of your portfolio is properly diversified. Investing solely in the tech sector raises your risk substantially, so you'll want to ensure you're also investing in plenty of stocks from other industries to better protect against volatility.

That could mean investing in a broad-market fund like an S&P 500 ETF or total stock market ETF, which would instantly expose you to stocks from a wide range of industries. Or you may choose to build a custom portfolio filled with individual stocks from areas outside of the tech sector.

If you're willing to take on slightly more risk for the chance at earning above-average returns, the Vanguard Information Technology ETF could be a fantastic buy heading into 2025. As part of a well-diversified portfolio, it could potentially supercharge your earnings with practically zero effort on your part.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $369,349!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $45,990!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $504,097!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of December 2, 2024

Katie Brockman has positions in Vanguard World Fund-Vanguard Information Technology ETF. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.