VGT vs. FTEC: Which Tech ETF Offers a Better Balance of Growth, Risk, and Cost for Long-Term Investors?

The U.S. technology sector remains a cornerstone of long-term growth strategies, and two of the most popular ETFs for accessing this space-Vanguard Information Technology ETF (VGT) and Fidelity MSCI Information Technology Index ETF (FTEC)-offer nearly identical exposure to tech giants like Apple, Microsoft, and NVIDIA. Yet, subtle differences in cost, structure, and risk metrics could tilt the scales for investors seeking the optimal balance of growth, efficiency, and diversification.

Cost Efficiency: A Marginal Edge for FTEC

Expense ratios, while small, compound meaningfully over decades. As of 2025, FTEC charges 0.08% in fees, while VGT's expense ratio stands at 0.09%. This 0.01% difference may seem negligible, but for a $100,000 investment, it could translate to hundreds of dollars in savings annually. However, VGT's larger asset base-with $25 billion versus FTEC's $12 billion-often offsets this fee gap. Larger ETFs typically offer superior liquidity and narrower bid-ask spreads, which can reduce transaction costs for investors.

Performance and Portfolio Structure: Slight Variations, Similar Outcomes

Over the past decade, VGT has outperformed FTEC, delivering 20.46% annualized returns compared to FTEC's 20.23%. This edge, though modest, reflects VGT's marginally higher concentration in its top three holdings: NVIDIA (16.60%), Apple (15.29%), and Microsoft (12.42%), totaling 45.41% of assets. FTEC's top three holdings (NVIDIA, Apple, Microsoft) account for 44.34% according to ETF data. While both funds mirror the MSCI USA IMI Information Technology 25/50 Index, VGT's broader portfolio-holding 350 stocks versus FTEC's 345-offers slightly more diversification.

Risk Metrics: FTEC's Volatility, VGT's Stability

FTEC's risk profile is well-documented: a beta of 1.24 (versus the S&P 500) and a maximum drawdown of -35% during the 2022-2023 market correction according to market analysis. These metrics suggest FTEC amplifies market swings, which could concern risk-averse investors. While VGT's specific risk metrics are not publicly available for 2025, its larger size and broader holdings likely temper volatility. Vanguard's indexing methodology also prioritizes liquidity and stability, which may reduce downside risk during sector-specific downturns.

Sector Exposure: A Shared Focus, Divergent Nuances

Both ETFs are heavily weighted toward electronic technology (e.g., semiconductors, software) and technology services, with minimal exposure to peripheral sectors. However, VGT's inclusion of smaller-cap tech firms-such as Palantir Technologies and Advanced Micro Devices-adds a layer of innovation-driven growth. FTEC, meanwhile, leans slightly more toward mega-cap stocks, which may offer steadier cash flows but less upside potential.

Strategic Recommendation: VGT for Most Investors

For long-term investors prioritizing liquidity, diversification, and slight performance advantages, VGT is the superior choice. Its larger size ensures tighter spreads and greater resilience during market stress, while its broader portfolio mitigates overexposure to any single stock. The 0.01% fee difference is unlikely to outweigh these structural benefits over decades.

That said, FTEC remains a compelling alternative for cost-sensitive investors, particularly those with existing Fidelity accounts. Its marginally lower expense ratio and near-identical holdings make it a viable option for those prioritizing fee efficiency above all else.

In a sector prone to rapid innovation and disruption, the nuances between VGT and FTEC may seem trivial. Yet, for investors seeking to optimize every variable-cost, risk, and growth-VGT's edge in size, diversification, and historical performance makes it the more strategic bet.