1 Risky ETF You Want to Avoid Buying in December

• The Vanguard Information Technology ETF (VGT) has outperformed each 3 large indexes done November.

• Nvidia, Apple, and Microsoft relationship for implicit 45% of VGT.

• 10 stocks we similar amended than Vanguard Information Technology ETF ›

The exertion assemblage has been connected a rotation implicit the past fewer years, particularly arsenic the artificial quality (AI) roar has brought galore investors into tech companies, hoping to instrumentality vantage of the caller maturation opportunities the exertion promises.

With galore tech stocks flourishing, tech exchange-traded funds (ETFs) person people followed suit. One successful particular, the Vanguard Information Technology ETF (NYSEMKT: VGT) is up astir 21% twelvemonth to day done November, outpacing the S&P 500 and tech-heavy Nasdaq Composite.

Despite VGT's occurrence done the archetypal 11 months of the year, it's an ETF I would steer wide of this month. Let's instrumentality a look astatine why.

VGT tracks the U.S. accusation exertion sector, containing 314 companies crossed a scope of industries successful the sector. The apical 5 industries are semiconductors, systems software, exertion hardware, exertion software, and semiconductor materials and equipment.

A cardinal facet of VGT is that it's weighted by marketplace cap, meaning larger companies relationship for a greater stock of the ETF than smaller ones. And that brings maine to wherefore I'm avoiding VGT successful December. The detonation of megacap tech stocks has led a fewer stocks to relationship for too much of VGT for my liking.

Below are VGT's apical 3 holdings and however overmuch they relationship for of the ETF:

Data source: Vanguard and Google Finance. Market headdress arsenic of 11 a.m. ET connected Dec. 1.

There's nary uncertainty that each 3 of the supra companies are world-class. Nvidia has a beardown clasp connected GPUs and different hardware indispensable to the AI ecosystem, Apple has revolutionized tech hardware arsenic we cognize it, and Microsoft is the tech Swiss Army knife, with its hands successful virtually each tech industry.

That said, having 3 companies relationship for implicit 45% of a 314-stock ETF isn't ideal.

There are respective tech-focused ETFs you tin put successful that clasp a bully magnitude of Nvidia, Apple, and Microsoft, without being truthful babelike connected their performance. Take the Invesco QQQ Trust ETF, which mirrors the Nasdaq-100, for example. The supra 3 stocks marque up astir a 4th of the ETF, yet QQQ's show astir mirrors VGT's truthful acold this year.