The Vanguard Information Technology Index Fund ETF (VGT) and the Fidelity MSCI Information Technology Index ETF (FTEC) are two of the largest information technology sector ETFs and two of the most popular among individual investors. Many investors compare VGT vs FTEC because they are so similar. Although the funds have slight historical differences, I expect that they will be much more similar moving forward.
A quick reminder that this site does NOT provide investment recommendations. Fund comparisons (such as this one) are not conducted to identify the “best” fund (since that will vary from investor to investor based on investor-specific factors). Rather, these fund comparison posts are designed to identify and distinguish between the fund details that matter versus the ones that don’t.
The Short Answer
VGT and FTEC track the same index and there is no material difference between the funds. They are identical and interchangeable in my opinion.
There is a long-term performance differential, although that mainly relates to how each fund handled changes to the underlying index. Barring further changes, performance is likely to be similar, if not identical.
The Longer Answer
Historical Performance: VGT vs FTEC
VGT was launched back in 2004, while FTEC was launched on October 21, 2013. Since then, the two funds have performed incredibly similarly, with an annualized difference of only .31%! The cumulative performance differential over that timeframe has compounded to about 10% too!
However there is more than meets the eye here. In 2018, MSCI made some changes to their classifications which impacted the information technology indices. Vanguard and Fidelity handled these changes in slightly different ways. However, if we track the two ETFs from the beginning of 2019, we find near identical performance, with an annualized difference of only .06%.
Consequently, from a performance perspective, I view VGT and FTEC as identical and interchangeable.
Portfolio Exposures: VGT vs FTEC
Both VGT and FTEC track the same index, the MSCI US Investable Market Information Technology 25/50 Index. Consequently, the two funds have identical geographic, market-cap, and industry exposures.
Geographic Exposure
Both VGT and FTEC hold essentially 100% stocks, so I will not dig into country exposures or market classification here. For all intents and purposes, the two funds have identical geographic exposures.
Market Cap Exposure
As mentioned above, both funds track the same index and have materially identical market cap exposures.
Sector Exposure
VGT and FTEC are information technology ETFs and so their holdings are 100% information technology stocks.
Practical Factors: VGT vs FTEC
Transaction Costs
As ETFs, both FTEC and VGT are free to trade on many platforms. Bid-ask spreads for both VGT and FTEC are extremely low and volume is sufficient to prevent most individual investors from “moving the market.”
Expenses
FTEC has a lower expense ratio at .08%, compared to VGT’s .10%. Although VGT is 25% more expensive, we’re talking about 2 basis points. At these low levels of expense ratios, the difference doesn’t matter.
Tax Efficiency & Capital Gain Distributions
Neither VGT nor FTEC has ever made a capital gains distribution and I do not expect them to make any moving forward. In my opinion, these two funds are equally tax-efficient.
From a tax-loss harvesting perspective, investors may want to avoid using these two funds as substitutes for one another since they could be considered “substantially identical” (given that they track the same index and are identical in many ways).
Bottom Line: VGT vs FTEC
VGT and FTEC are identical in nearly every way. I would not spend any time comparing them or trying to decide which is better.
