The S&P 500 includes around 500 large and successful American companies, attracting investors who prefer a straightforward way to engage with the stock market. Yet, there are alternative options for capital allocation.
The Vanguard Total Stock Market ETF (VTI) offers a broader view of the U.S. economy, with a very appealing expense ratio of just 0.03%, which many Vanguard clients appreciate.
What about long-term investments? Exchange-Traded Funds (ETFs) can provide some interesting opportunities.
Know What You Own
In comparison to the S&P 500, the Vanguard Total Stock Market ETF is much more diversified, encompassing about 3,500 holdings. It includes companies from all sectors and sizes, which is handy if you’re aiming to invest in a wide range of American businesses.
Though there are many stocks, a significant portion is concentrated in the top companies. The top ten holdings make up 34% of the portfolio, where names like Nvidia, Apple, and Microsoft collectively account for 17%, slightly less than their share in the S&P 500.
Investors should be aware that the performance of these tech giants heavily influences the ETF’s overall performance, especially with the recent focus on trends in artificial intelligence.
Vanguard Total Stock Market ETF
Today’s changes
-0.22% $-0.80
Current price
$363.67
Key Data Points
Daily range
$356.28 – $368.66
52-week range
$291.97 – $374.70
Volume
14K
Investors Could Do Worse
Over the last decade, the Vanguard Total Stock Market ETF has produced a total return of 294% as of June 8th, effectively quadrupling investors’ initial capital. Key factors have included earnings growth and valuation expansion.
Currently, the ETF is priced about 3% below its all-time high, which might make some investors consider holding off on purchasing. Waiting for a price drop seems wise, though timing the market can be tricky. Dollar-cost averaging—investing at various price points—could be a better strategy.
It’s not entirely straightforward to declare the Vanguard Total Stock Market ETF as the right choice for every long-term investor. Individual goals, risk tolerance, and investment timelines play significant roles.
However, for those looking to invest in U.S. businesses through one vehicle, this ETF is an excellent option. While some may doubt the economy’s strength or the potential for growth, selecting individual stocks isn’t always feasible for everyone. This ETF offers a simple and effective route for many investors.
