What are overlap costs in ETFs?

Overlap costs are hidden fees from holding the same stocks in multiple funds, resulting in paying multiple management fees on the same holdings.

How can investors avoid overlap costs?

Investors can reduce overlap by choosing funds with distinct holdings or using a single broad-based fund instead of multiple overlapping ones.

Do overlap costs significantly impact returns?

Yes, over time, overlap costs can add up to tens of thousands of dollars, reducing net returns for the investor.

VGT's Low Fee Hides a Bigger Problem: Overlap Costs

Vanguard's tech ETF VGT sells itself on a low 0.09% expense ratio, but the real cost lies in overlap with other funds. Investors may pay hidden fees on duplicate holdings, potentially costing tens of thousands over time.

July 2, 2026

2 min read

Source: 24/7 Wall St.

Key Numbers

expense ratio

0.09%

Vanguard's Information Technology Index Fund ETF (VGT) markets itself on cost. At 0.09%, it sits near the floor of sector ETF pricing. That headline number is real, but it is also the least interesting cost in the fund.

The Real Cost of VGT

The disclosed fee reflects the fund's 0.09% net expense ratio. However, the bigger issue is overlap costs. When an investor holds VGT alongside other funds like QQQ or SPY, they are buying the same stocks repeatedly, incurring hidden fees.

How Overlap Costs Accumulate

For example, if an investor owns both VGT and an S&P 500 fund (SPY), large tech stocks like Apple and Microsoft will appear in both. This overlap means paying fees on the same holdings twice. Over time, these extra costs can add up to tens of thousands of dollars.

What This Means for Investors

Investors should look beyond the stated expense ratio and evaluate their portfolio's total costs. Reducing overlap between funds can significantly improve net returns over the long term.

Frequently Asked Questions

VGT's net expense ratio is only 0.09%.

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This article was rewritten in Wrqti's editorial style based on information from the original source above. Content is informational only — not investment advice.