VGT vs. CHAT: Two Tech ETFs With Different Approaches on Management and Fees

Core Insights - The article compares two technology-focused ETFs: Roundhill Investments' Generative AI & Technology ETF (CHAT) and Vanguard Information Technology ETF (VGT), highlighting their distinct management styles and investment focuses [3][4]. Fund Characteristics - CHAT is actively managed, holds 47 stocks, and emphasizes an ESG screen, with 83% of its portfolio in technology and 11% in communication services [1][3]. - VGT is passively managed, contains 316 stocks, and is heavily weighted towards major tech companies, with 98% of its assets in technology [2][3]. Performance Comparison - Both funds have outperformed the S&P 500 over the past two years, with CHAT achieving a total return of 95% (CAGR of 39.9%) and VGT a total return of 58% (CAGR of 25.9%) [4][5]. - CHAT's narrower focus on AI leads to higher volatility and a greater beta value compared to VGT, which is more diversified and less volatile [5][7]. Cost Structure - CHAT has a higher expense ratio of 0.75%, resulting in $75 annual fees for a $10,000 investment, while VGT has a lower expense ratio of 0.09%, leading to $9 in annual fees [5][7]. Historical Context - VGT has a performance history dating back to 2004, providing over 20 years of data, while CHAT was launched in July 2023, lacking long-term performance evidence [6][7]. Investor Appeal - CHAT is suited for aggressive investors willing to pay higher fees for a focused investment in AI, while VGT appeals to long-term investors seeking broad tech exposure at a lower cost [7].