Why I’d invest $5,000 in this Vanguard ETF

Technology remains one of the areas of the market where I see plenty of long-term growth ahead.

That is why the Vanguard Global Technology Index ETF (ASX: VTEK) has caught my attention.

If I had $5,000 to invest in a Vanguard ETF today, this is one I would be happy to buy and hold for the long term.

A way to invest in AI

Artificial intelligence (AI) would be one of my main reasons for owning the VTEK ETF.

The current AI boom requires enormous investment in computing power, semiconductors, cloud infrastructure, and software. This Vanguard ETF gives investors exposure to businesses operating across several parts of that chain.

NVIDIA, for example, has become one of the most important suppliers of the chips used to train and run AI models.

But the opportunity extends beyond chip designers. Taiwan Semiconductor Manufacturing manufactures many of the advanced semiconductors required across AI and other high-performance computing applications.

For me, that is one of the strengths of the VTEK ETF. Instead of trying to identify the single company that will benefit most from AI, investors can gain exposure to several businesses helping build the infrastructure behind it.

More than one technology trend

AI may be generating most of the headlines, but I would not invest $5,000 in this ETF based on that theme alone.

Technology spending continues to spread through almost every part of the economy.

Businesses are shifting more operations to the cloud, adopting new software tools, automating processes, and using data in increasingly sophisticated ways.

Microsoft is a good example of how several of these trends can come together. Its position in cloud computing and business software means it can benefit as companies invest more heavily in digital infrastructure while also introducing AI capabilities across existing products.

The fund also provides exposure to consumer technology through companies such as Apple.

That broader mix is important to me because it means VTEK is not dependent on one product cycle or one area of technology spending.

Why I like this Vanguard ETF’s structure

Another thing I like is simplicity.

Building a portfolio of individual global technology shares would require deciding how much to allocate to semiconductors, software, cloud computing, hardware, and other parts of the sector.

The Vanguard Global Technology Index ETF does that through a single ASX investment while providing exposure to a large collection of global technology companies.

That makes it an easy way for me to add a dedicated technology allocation alongside broader Australian or international investments.

There is a trade-off, though. This is still a sector-focused ETF, so I would expect it to be more volatile than a broad global shares fund. Its largest holdings also have a meaningful influence on performance.

For that reason, I would see this Vanguard ETF as one part of a diversified portfolio rather than something I would build an entire portfolio around.

Foolish takeaway

If I had $5,000 available for a long-term investment, this Vanguard ETF would be high on my list.

I like that it provides exposure to the infrastructure supporting AI, while also capturing growth across cloud computing, software, semiconductors, and consumer technology.

Technology will almost certainly look different a decade from now. Rather than trying to predict which individual company will dominate, I would be comfortable owning a fund positioned across several of the areas driving that change.

The post Why I’d invest $5,000 in this Vanguard ETF appeared first on The Motley Fool Australia.

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Motley Fool contributor Grace Alvino has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool Australia has recommended Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.