VGT’s 0.09% Fee Hides a Bigger Problem: Overlap Costs That Could Add Up to Tens of Thousands

Vanguard’s tech ETF sells itself on cost. At 0.09%, Vanguard Information Technology Index Fund ETF (NYSEARCA:VGT) sits near the floor of sector ETF pricing. That headline number is real. It is also the least interesting cost in the fund.

What You Are Actually Paying

The sticker fee reflects the fund’s 0.09% net expense ratio disclosed in the June 30, 2026 prospectus. That lands at roughly $9 a year on every $10,000 invested. Small in isolation. Over 20 years on a $100,000 position that compounds into thousands of dollars of drag, before any return shortfall is layered on top. That is the disclosed cost.

The undisclosed cost sits in the return column. Over the past year, VGT delivered 44.8%. Over the same window, State Street’s Technology Select Sector SPDR Fund (NYSEARCA:XLK) returned 51.25% and Fidelity’s Fidelity MSCI Information Technology Index ETF (NYSEARCA:FTEC) returned 45.42%. Stretch to five years and VGT compounded to 147.78%, versus XLK at 167.44% and FTEC at 150.56%. Same sector label. Different math. The fee gap between these funds is measured in a few dollars a year per $10,000. The return gap is measured in tens of thousands.

The Part The Factsheet Does Not Highlight

Start with concentration. Vanguard’s tech index and its closest cousin, Fidelity’s MSCI Information Technology index, load heavily at the top. FTEC’s most recent regulatory filing shows NVIDIA at 17.97% of net assets, Apple at 14.36%, Microsoft at 9.53%, and Broadcom at 5.01%. VGT tracks a similar universe with similar concentration. Four companies drive close to half the fund’s fate.

That creates a second hidden cost: overlap. If you already hold an S&P 500 index fund, you already own NVIDIA, Apple, Microsoft, and Broadcom at meaningful weights. VGT quietly doubles that bet under a sector-diversification label. You are amplifying a position you already have, and paying a sector-fund fee to do it.

Then there is the benchmark itself. VGT tracks a proprietary MSCI US tech classification that excludes several names most investors think of as tech. Meta and Alphabet sit in communication services. Amazon sits in consumer discretionary. The fund is billed as a bet on technology; in practice it is a bet on hardware, semiconductors, and enterprise software. XLK’s 51.25% one-year return versus VGT’s 44.8% reflects that classification gap as much as any fee difference.

The Cheaper Mirror

Two funds cover nearly the same ground for less friction. FTEC tracks the MSCI USA IMI Information Technology Index and has historically priced below VGT’s 0.09%. Its $17.89 billion in net assets gives it real liquidity, and its five-year return of 150.56% edged VGT’s over the same period. XLK, State Street’s Technology Select Sector SPDR, uses a slightly different index but has consistently out-earned VGT: 167.44% over five years and 873.75% over ten, against VGT’s 875.08% ten-year. The trade-off comes down to index construction.

What This Means For You

VGT is an expensively packaged version of an exposure most tech-tilted investors already own through their core index holdings. Before adding it, ask a single question: what am I buying that my S&P 500 fund does not already give me, and is a slightly cheaper sector ETF giving me the same thing for less? The 0.09% fee is real. The overlap is what quietly costs.

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