Is This the Worst-Performing Tech ETF?

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Know-how shares have soared over the previous 5 years as the substitute intelligence (AI) increase has taken form. That is despatched many know-how exchange-traded funds (ETFs) rising, together with the broad S&P 500. However not everybody has benefited equally. In truth, some tech ETFs have carried out poorly regardless of the widespread advantages of AI shares.

One such know-how ETF that is one of many worst-performing is Cathie Wooden’s ARK Innovation ETF (NYSEMKT: ARKK). The fund’s share worth is down 28% over the previous 5 years, in comparison with the S&P 500’s achieve of 86%. Even when it is not the worst-performing tech ETF, it is actually one of many worst, and a major disappointment for a lot of buyers.

Here is why it has didn’t hold tempo, and why the Vanguard Data Know-how ETF (NYSEMKT: VGT) is a greater tech fund to personal.

A person looking at a phone. — Picture supply: Getty Photos.

One of many key the reason why ARK Innovation has carried out poorly in comparison with the S&P 500 benchmark and amid so many rising tech shares is that the fund is extremely concentrated in a small variety of shares. For instance, its prime 10 holdings account for greater than half of the whole fund’s weight.

What’s extra, a few of its holdings are in extremely speculative and unprofitable corporations. Think about that 2% of the fund is in Archer Aviation, the electrical vertical take-off and touchdown (eVTOL) firm, which has but to generate income or revenue. Archer’s inventory may be very risky, and over the previous 5 years, its share worth is down 15%.

Whereas there have been some winners within the fund — Tesla is the fund’s prime holding and has returned 126% over the previous 5 years — they have not been sufficient to offset the losses from its extra speculative investments.

One of many principal the reason why the Vanguard Data Know-how ETF is such a very good various is as a result of it is a well-diversified fund that also advantages from the largest tech traits. The fund tracks the MSCI US Investable Market Data Know-how 25/50 Index, which consists of 300 small- to large-cap corporations, making certain that you’ve publicity to tech leaders and disruptors on the similar time.

Simply over half of the fund is invested in semiconductor and software program corporations, each of which have benefited considerably from the expansion of synthetic intelligence. This has helped the Vanguard Data Know-how ETF rise 124% over the previous 5 years. In case you suppose these are simply non permanent flash-in-the-pan returns, take into account that the fund has a median annual return of over 14% since its inception in 2004.

What’s extra, the fund expenses a really low annual expense ratio of simply 0.09%, in comparison with ARK Innovation’s 0.75%. With its considerably increased returns and far decrease charges, the Vanguard Data Know-how ETF is a no brainer wager in comparison with ARK Innovation.

Before you purchase inventory in Vanguard Data Know-how ETF, take into account this:

The Motley Idiot Inventory Advisor analyst crew simply recognized what they consider are the 10 greatest shares for buyers to purchase now… and Vanguard Data Know-how ETF wasn’t certainly one of them. The ten shares that made the lower might produce monster returns within the coming years.

Think about when Netflix made this checklist on December 17, 2004… in the event you invested $1,000 on the time of our suggestion, you’d have $540,587!* Or when Nvidia made this checklist on April 15, 2005… in the event you invested $1,000 on the time of our suggestion, you’d have $1,118,210!*

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See the ten shares »

*Inventory Advisor returns as of December 1, 2025

Chris Neiger has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Tesla. The Motley Idiot has a disclosure coverage.

Is This the Worst-Performing Tech ETF? was initially revealed by The Motley Idiot

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