The stock market increased its volatility in 2025, in part because of President Donald Trump’s tariff actions. But the market has been resilient and clawed back from losses earlier in the year, with both the S&P 500 and the Nasdaq Composite now slightly up year to date.
One sector that’s played a significant role in the rebound is the technology industry. The sector is in the midst of a pivot to artificial intelligence (AI) to take advantage of the massive opportunity that is forecast to contribute as much as $15.7 trillion annually to the global economy by 2030.
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The success of AI-related stocks so far has been a bit uneven, and picking winners in the AI race is difficult. So, how can investors with limited capital available to buy stocks with — say $500 — diversify their tech bets to increase their chances of an outsized return on that $500 investment? One of the best ways is to invest in a technology exchange-traded fund (ETF) that spreads your investment across many companies.
Here’s why the Vanguard Information Technology ETF (NYSEMKT: VGT) could be a great option for that $500 initial purchase.
Image source: Getty Images.
This Vanguard ETF is diversified
The Vanguard Information Technology ETF tracks the MSCI US Investable Market Information Technology 25/50 index, which includes more than 300 technology companies. That’s great for tech investors because you never know when a small start-up will begin disrupting a larger, more established player.
With the Vanguard Information Technology ETF, you don’t have to guess whether David or Goliath will win. Your investment is spread across hundreds of companies, from small-cap to large-cap. The fund is market-cap weighted, which means larger technology companies make up a larger percentage of the fund.
In short, you get exposure to a myriad of tech companies of varying sizes that are building the latest hardware and software used by millions of customers and companies. While it’s not an AI-specific fund, with so many companies in the fund, you’ll be invested in leading artificial intelligence heavy-hitters, including Nvidia, Microsoft, Palantir Technologies, and many more.
The ETF has a good track record
As always, investors should remember that past performance doesn’t guarantee future gains. This holds for the Vanguard Information Technology ETF, too. But it is worth looking at its past performance to assess whether it’s been a good investment.
The fund was established in 2004, and since then, it’s been far and away a better investment than the S&P 500. Just in the past decade, the tech fund returned 543% (with dividends reinvested) compared to the broader market’s 245% gains.
Data by YCharts.
That’s not too surprising, considering that technology stocks often perform better than many other sectors. For example, the 690% gains from AI leader Nvidia over the past three years have had a significant impact on the fund’s performance.
While no one knows what the future will bring for the fund, we know that AI is still in its beginning stages and could be worth trillions of dollars in the coming years. This means that many companies in the Vanguard Information Technology ETF could be poised for more growth in the years ahead.
The Vanguard Information Technology ETF is cheap to own
All funds charge fees, and the average expense ratio for indexed ETFs is about 0.41%. But Vanguard has a great reputation for charging very low fees, and the Vanguard Information Technology is no different. The fund’s expense ratio is just 0.09%, meaning you’ll pay just $9 in annual fees for every $10,000 invested.
If you’ve got $500 to invest right now, it’s worth mentioning that one share of the fund is priced around $625 as of June 13. But that shouldn’t keep most investors from buying the fund because many brokerages offer fractional shares, which allow you to buy portions of a share.
With technology stocks consistently outpacing the market and Vanguard offering an inexpensive and diversified tech fund option, the Vanguard Information Technology ETF should be a no-brainer buy for many investors.
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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft, Nvidia, and Palantir Technologies. 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.
