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Thursday August 09, 2012
A 'Vanguard' in info tech
by Doug Fabian, editor Making Money Alert The global slowdown has impacted nearly every sector, including information technology. But that sector benefits from new smartphones and other innovations. For those reasons, the sector may warrant higher valuations than it has been receiving lately. The Vanguard Information Technology Index Fund (VGT) is an ETF that may let investors collect sizable returns as the information technology sector rises and equities rebound. Despite slight declines in May and June, the fund remains up 11.3% year-to-date, and it is trading above both its 50- and 200-day moving averages, indicating a clear uptrend. VGT's holdings primarily consist of true information technology companies. A whopping 43.7% of the fund's total net assets come from just five companies, so VGT's performance is tied heavily to those industry leaders. The top five holdings are: Apple, IBM, Microsoft, Google and Intel. Despite lower-than-expected earnings, all of the companies have significant potential to boost sales and revenue growth through the release of new products during the second half of 2012. The new products are expected to include Apple's iPhone 5 and Google's Nexus 7. With nearly half of the fund's holdings consisting of the five biggest IT companies, VGT is a sector-specific fund that is much less diversified and exposes investors to heightened risks, compared to many other ETFs. Still, with an historic track record of IT companies outperforming the S&P 500 Index, VGT remains an intriguing opportunity. Another plus for VGT is that its low portfolio turnover rate of 6% allows investors to pocket more of their gains and provides an additional advantage compared with similar funds. Also, the ETF offers a total annual operating expense rate of 0.19%, which is 88% lower than the industry average. It is my expectation that VGT's holdings could help investors to profit nicely in a recovering economy. Learn more about this financial newsletter at Doug Fabian's Making Money Alert. Related articles: 
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