This Unstoppable Vanguard ETF Might Smash the S&P 500 in 2025

The S&P 500 (SNPINDEX: ^GSPC) has carried out remarkably effectively in recent times, hovering by round 23% in 2024 alone and by greater than 80% over the previous 5 years.

However as robust as these figures are, loads of shares and funds have crushed the S&P 500 these days.

There is no technique to know for sure how the market will carry out in 2025, and higher-risk, higher-reward sorts of investments can usually expertise elevated volatility within the brief time period. However there’s one powerhouse Vanguard ETF that has outpaced the S&P 500 in recent times, and there is motive to consider it’d proceed that development this 12 months.

Coin being inserted into a blue piggy bank. — Picture supply: Getty Photos.

The Vanguard Data Expertise ETF (NYSEMKT: VGT) is a fund solely devoted to tech shares. Apple (NASDAQ: AAPL), Nvidia (NASDAQ: NVDA), and Microsoft (NASDAQ: MSFT) are the three most closely weighted shares on this ETF, making up a mixed 44.94% of the whole fund. The highest 10 holdings general comprise near 60% of the whole ETF, with the remaining 306 shares rounding out the opposite 40%.

An ETF that is so closely weighted towards a handful of shares might be each a threat and a bonus. On one hand, it presents a lot much less diversification than an ETF that is extra evenly unfold throughout all kinds of shares from a number of industries — rising threat. That stated, if these shares proceed their successful streak, you can see critical returns.

Lots of this ETF’s prime holdings are closely centered on developments in synthetic intelligence (AI). Nvidia, for instance, is a key provider of the graphics processing items (GPUs) utilized by many AI builders.

With AI exploding in recent times, shares with a heavy deal with the expertise have surged together with them. The Vanguard Data Expertise ETF has earned whole returns of near 74% during the last two years, in comparison with the S&P 500’s whole returns of 48% in that point.

^SPX Chart — ^SPX information by YCharts

Nevertheless it’s not simply current developments in tech which have propelled this fund additional. The Vanguard Data Expertise ETF has an extended historical past of incomes above-average returns, with a mean return of greater than 13% per 12 months since its inception in 2004 — greater than the market’s historic common of round 10% per 12 months.

Whereas there are not any ensures that large tech shares will proceed thriving within the coming years, this ETF has a decades-long historical past of outperforming the market.

Late final month, Nvidia skilled a historic fall after the emergence of DeepSeek, a Chinese language AI chatbot that might pose a aggressive risk to different firms closely centered round AI expertise. The sharp decline made historical past as the most important single-day sell-off for a person inventory in U.S. market historical past.

Whereas many traders are not overly involved about DeepSeek or its position in Nvidia’s future, the sell-off highlights the danger of investing in rising applied sciences. Whereas it could possibly gasoline supercharged earnings, the downturns may also be brutal.

Earlier than you spend money on any ETF, it is smart to weigh the dangers versus the rewards. That is very true when shopping for tech funds, as there are extra dangers to think about. New rivals can pop up rapidly, and in case your funding is closely centered on just a few shares, you can see important volatility if these shares cannot sustain with business traits.

The Vanguard Data Expertise ETF has an extended historical past of beating the S&P 500, and if AI continues its dominance within the tech sector, this fund might be poised for much more development. Simply think about your threat tolerance before you purchase, and double-check that the remainder of your portfolio is well-diversified to guard your cash as a lot as attainable.

Ever really feel such as you missed the boat in shopping for essentially the most profitable shares? Then you definitely’ll wish to hear this.

On uncommon events, our skilled group of analysts points a “Double Down” inventory suggestion for firms that they suppose are about to pop. For those who’re nervous you’ve already missed your likelihood to speculate, now could be one of the best time to purchase earlier than it’s too late. And the numbers converse for themselves:

Nvidia: in the event you invested $1,000 once we doubled down in 2009, you’d have $336,677!*
Apple: in the event you invested $1,000 once we doubled down in 2008, you’d have $43,109!*
Netflix: in the event you invested $1,000 once we doubled down in 2004, you’d have $546,804!*

Proper now, we’re issuing “Double Down” alerts for 3 unimaginable firms, and there might not be one other likelihood like this anytime quickly.

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*Inventory Advisor returns as of February 3, 2025

Katie Brockman has positions in Vanguard World Fund-Vanguard Data Expertise ETF. The Motley Idiot has positions in and recommends Apple, Microsoft, and Nvidia. The Motley Idiot recommends the next choices: lengthy January 2026 $395 calls on Microsoft and brief January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure coverage.

Prediction: This Unstoppable Vanguard ETF Might Smash the S&P 500 in 2025 was initially revealed by The Motley Idiot