VGT, VHT: 2 ETFs to Buy as Vanguard Cuts Fees on Funds
Vanguard has recently cut fees on nearly half of its U.S. funds, making its ETFs attractive for the investors. In this article, let’s take a closer look at two Vanguard ETFs, VGT and VHT, with over 15% upside potential in the next twelve months.
Vanguard, the world’s second-largest ETF issuer, recently announced its largest fee cuts in its 50-year history. The company has reduced fees on nearly half of its U.S. funds by an average of 20%. With lower costs, now is the right time to consider investing in two Vanguard ETFs: the Vanguard Information Technology ETF (VGT) and the Vanguard Health Care ETF (VHT). According to analysts, these two ETFs have a potential upside of over 15% in the next 12 months. Also, both ETFs benefit from Vanguard’s recent fee reductions, making them attractive for long-term investors.
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Following the news of fee cut, shares of asset management companies such as BlackRock (BLK) and Franklin Resources (BEN) dropped by 5.7% and 6.8%, respectively. Also, Invesco (IVZ) and State Street (STT) saw declines of 4.6% and 3.4%, respectively. This downturn is attributed to investors’ concerns about the potential impact of the fee cut on revenue of these companies.
Let’s take a deeper look at these two ETFs.
Vanguard Information Technology ETF (VGT)
VGT provides exposure to the technology sector, which includes companies like Apple (AAPL), Microsoft (MSFT), and Nvidia (NVDA). The ETF aims to track the performance of the MSCI US Investable Market Information Technology 25/50 Index.
Effective February 1, 2025, the expense ratio for VGT was reduced from 0.10% to 0.09%. While this reduction seems small, it can have a major impact on net returns for long-term investors. Overall, the VGT ETF has $87.36 billion in assets under management (AUM). Additionally, it has returned 20% in the past six months.
Turning to Wall Street, the VGT ETF has a Moderate Buy consensus rating based on 232 Buys, 77 Holds, and eight Sells assigned in the last three months. At $746.82, the average VGT ETF price target implies a 22.86% upside potential.
Vanguard Health Care ETF (VHT)
The VHT ETF seeks to track the performance of the MSCI U.S. Investable Market Index (IMI)/Health Care 25/50. This index is made up of large, mid-size, and small U.S. companies within the healthcare sector. The VHT ETF aims to hold each stock in approximately the same proportion as it appears in the index.
VHT ETF has also benefited from Vanguard’s recent fee cut as its expense ratio has been reduced to 0.09% from 0.10%. Further, it has $17.17 billion in AUM and has generated a return of 1.5% over the past six months.
On TipRanks, VHT has a Moderate Buy consensus rating based on 343 Buys, 65 Holds, and five Sells assigned in the last three months. At $319.26, the average VHT ETF price target implies a 17.64% upside potential.
Concluding Thoughts
ETFs offer several benefits over individual stocks, such as diversification, lower costs, and long-term capital appreciation. Further, these ETFs have better liquidity, allowing investors to buy and sell shares conveniently. Additionally, the recent fee cuts by Vanguard make VHT and VGT ETFs worth considering, as lower costs could lead to higher returns over time.
