VGT vs PSI: What's the Better Buy?
Two major tech-focused exchange-traded funds (ETFs) have delivered strong returns over the past decade, but their approaches differ sharply. The Vanguard Information Technology ETF (VGT) spreads investments across hundreds of stocks, while the Invesco Semiconductor ETF (PSI) concentrates solely on semiconductor companies. This contrast in strategy has led to varying performance and risk levels for investors.
VGT holds 322 tech stocks, covering nearly a dozen subsectors. Semiconductors make up its largest share, but the fund also includes software, hardware, infrastructure, and manufacturing services. This broad exposure helps reduce risk when certain sectors struggle, though it may also lower overall returns by including weaker-performing stocks.
PSI, on the other hand, focuses entirely on semiconductors with just 30 holdings. This narrow approach increases risk but has historically produced higher returns. Over the last decade, PSI achieved an average annual return of 24.98%, compared to VGT’s 22.18%. Another semiconductor-focused ETF, the Invesco PHLX Semiconductor ETF (SOXQ), launched in 2021, has seen total returns of around 450% over the past ten years. This outpaces the iShares PHLX Semiconductor ETF (SOXX) at 380% and the VanEck Semiconductor ETF (SMH) at 420%, based on adjusted closing prices and reinvested dividends.
Both ETFs offer strong investment potential, but their suitability depends on individual preferences. Investors seeking stability may prefer VGT’s diversification, while those chasing higher returns might opt for PSI’s concentrated semiconductor exposure. The decision ultimately hinges on risk tolerance, financial goals, and existing portfolio composition.
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