The Vanguard Information Technology ETF (NYSEMKT:VGT) closed at $129.80 on Oct. 6, its record close. As I write, it sits around $117, about 10% under that price.
The fund lost about 4% on Friday alone, and Intel, one of the tech firms it owns, was down more than 25% after the chipmaker posted third-quarter results on Thursday.
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But a slide like this is nothing new for the fund. By my count, VGT has closed at least 10% under a previous record on 19 separate occasions in daily price data going back to January 2004, counting just one close per drop until the fund hit its next record.
Seventeen of those are old enough to check a full year later. The fund finished that year higher in 14 of them, and the median result was a rise of around 21%. These numbers use only daily closing prices (no dividends), adjusted for the fund’s 8-for-1 share split in April.
Image source: Getty Images.
Higher a year later in 14 of 17
The 19 drops came in 2004 (March 22), 2006 (May 23), 2007 (Nov. 12), 2011 (June 15), 2012 (May 17 and Nov. 8), 2015 (Aug. 24), 2016 (Jan. 7), 2018 (Feb. 8 and Oct. 24), 2019 (June 3), 2020 (Feb. 25 and Sept. 8), 2021 (March 8), 2022 (Jan. 19), 2024 (Aug. 2), 2025 (March 3 and Nov. 20), and 2026 (June 10). The last two are too recent to score.
Some of the rebounds were huge. The fund climbed around 44% over the year after its Feb. 25, 2020, close, early in the pandemic, and about 42% after the Sept. 8, 2020, drop.
Of course, not all worked out. The three misses were March 2004 (down around 2% a year later), November 2007 (down about 44%), and January 2022 (down about 21%).
And the wait for a new record was often short. For all 19 cases, the median gap between the 10% close and the next record close was around four months.
Is a 10% drop a better time to buy?
Not by much, it seems. Using every trading day since 2004 with a full year of data after it, the fund climbed over the next 12 months around 82% of the time. The median gain was about 16%.
In other words, 14 of 17 (also around 82%) matches the fund’s usual hit rate. The drops have arguably come with a somewhat bigger median gain, but they haven’t improved the odds. After all, a fund full of growth stocks has risen over most 12-month periods since 2004.
