Apple represents 20.13% of Vanguard’s Information Technology ETF (VGT); Microsoft represents 16%. Is this ETF really diversified?

by ncrowley

I was looking at Vanguard Information Technology (VGT) holdings this afternoon, and was shocked to find that although there are 331 companies in this ETF, 36% of the entire fund consists of just two companies: Apple and Microsoft. See here: investor.vanguard.com/etf/profile/portfolio/VGT/portfolio-holdings

The reason that I invest in ETFs is to diversify my holdings of equity securities. I’ve been tossing a few dollars into VGT since last year, under the assumption that since it’s an ETF, my investments will be broadly diversified across the information technology industry. So here are some questions I now have:

1. Is this dramatic skewedness toward just one or two companies unusual in an ETF?
2. Does anyone care to explain why such a skewness is justified in this case?
3. What are some technology ETFs that better balances the exposure to each company in the fund, but also have near-zero expense ratios?