Vanguard Total Stock Market ETF can be the foundation from which you expand and grow.
Some investors just want everything -- and they can have it if they buy Vanguard Total Stock Market ETF (VTI -0.85%). That's only sort of a joke. The real story here is that this highly diversified ETF is a great starting point for new investors and can be used as a foundation for growth both in your portfolio and in your investment knowledge. Here are some reasons why you might want to buy Vanguard Total Stock Market ETF.
Everything, market cap weighted
Vanguard Total Stock Market ETF is an exchange-traded fund that buys every security that can be purchased on U.S. exchanges. It currently holds 3,747 stocks. That's a number that no small investor would be wise to try to replicate on their own -- it would simply be too hard to manage. That is why an ETF like this exists. With one single purchase, you can get exposure to all of those stocks for an expense ratio of just 0.03%. That's shockingly cheap.
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That said, you don't own everything equally with Vanguard Total Stock Market ETF because it is market cap weighted. That means that the largest stocks will have the biggest impact on performance because they have the most assets invested in them. The largest stocks are usually the best-performing stocks. With so many stocks in the portfolio, however, the benefit of this is muted somewhat relative to smaller portfolios. But market cap weighting is still important to keep in mind.
All in, Vanguard Total Stock Market ETF is a great foundational investment that allows you to just "own the market." You won't outperform, but you won't underperform, either. Pair it with a broadly diversified bond ETF, and you have a quickly balanced portfolio that only needs updating once a year (to bring the stock and bond allocation back in line with your targets). This could be the only stock-focused investment you ever buy.
You'll probably want to do more
If you are like most avid investors, however, buying Vanguard Total Stock Market ETF won't satisfy your desires. You'll want to buy individual stocks or highlight specific sectors. There's nothing wrong with that. Once you've gotten a little time investing under your belt, you could sell Vanguard Total Stock Market ETF and shift to buying stocks and more focused ETFs. That's like taking the training wheels off and getting on the 10-speed bike.
Or you can change the analogy and keep Vanguard Total Stock Market ETF for the long term. The shift in mindset is to look at the ETF not as just an investment training tool but as a foundation for the rest of your investments. In this way of seeing the world, Vanguard Total Stock Market ETF provides broad diversification and stock exposure that helps to reduce the inherent risk of choosing individual stocks. The best part is that you get to decide how much of a foundation you maintain.
For example, if you started with 100% of your assets in Vanguard Total Stock Market ETF, you might choose to carve out 10% to buy individual stocks once you got more comfortable with investing. That would let you learn more without taking the risk of upending your long-term saving and investing goals. Maybe you can only reasonably buy one or two stocks with that 10%, but so what? You are trying to expand your knowledge and, hopefully, do just a little better than the average you are wedded to with Vanguard Total Stock Market ETF. As you get more and more experience, you can increase the percentage you dedicate to other investments.
But there's a reverse option here. Anytime you feel like you are taking on too much individual stock risk, you can just sell those stocks and buy more Vanguard Total Stock Market ETF. That's something that you might actually decide to do as you get older and prefer to play golf and spend time with friends and family rather than poring over 10Ks. Or it could be during periods of life when complexity increases, like having a child or buying a home. The idea is that Vanguard Total Stock Market ETF is the foundation that you want it to be when you want it to be there.
Not for everyone, but a great option
Vanguard Total Stock Market ETF has a miserly 1.4% dividend yield, which is about what you would expect for such a widely diversified ETF. So, income investors might not find it appealing. And yet, if you think about the ETF the right way, it could be a valuable tool in your investment toolbox as you journey from investment novice to investment expert to retired and choosing to do other things. That's something that every investor should consider keeping on their wish list, if not their buy list.
Reuben Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard Index Funds-Vanguard Total Stock Market ETF. The Motley Fool has a disclosure policy.
FAQs
The Motley Fool has positions in and recommends Microsoft, Vanguard Index Funds - Vanguard Growth ETF, and Vanguard Index Funds - Vanguard Total Stock Market ETF.
Is Vanguard Total Stock Market ETF a good investment? ›
All in, Vanguard Total Stock Market ETF is a great foundational investment that allows you to just "own the market." You won't outperform, but you won't underperform, either.
Is VTI a buy right now? ›
VTI has a consensus rating of Moderate Buy which is based on 2374 buy ratings, 1211 hold ratings and 83 sell ratings. What is VTI's price target? The average price target for VTI is $294.68. This is based on 3668 Wall Streets Analysts 12-month price targets, issued in the past 3 months.
Is Vanguard Total Stock Market ETF a millionaire maker? ›
Getting rich slowly
The big takeaway here is that Vanguard Total Stock Market ETF is a way to build wealth over time. It can definitely help you reach millionaire status, but it will be a process getting there, not an overnight success story.
Is it good to invest in Vanguard ETF? ›
Vanguard ETFs have low investment minimums, relatively low expense ratios and and offer instant diversification. Alana Benson is an investing writer who joined NerdWallet in 2019.
What is the best performing total stock market ETF? ›
The largest Total Market ETF is the Vanguard Total Stock Market ETF VTI with $394.26B in assets. In the last trailing year, the best-performing Total Market ETF was MTUL at 76.07%. The most recent ETF launched in the Total Market space was the JPMorgan Active Developing Markets Equity ETF JADE on 05/16/24.
Is VTSAX a good long-term investment? ›
Ultimately, both VTI and VTSAX can be good investment options for long-term investors seeking broad exposure to the U.S. equity market.
What will VTI be worth in 5 years? ›
Vanguard Total Fund VTI stock price stood at $261.75
According to the latest long-term forecast, Vanguard Total Fund VTI price will hit $300 by the middle of 2025 and then $350 by the middle of 2027. Vanguard Total Fund VTI will rise to $450 within the year of 2028, $500 in 2030 and $600 in 2034.
Why do people invest in VTI? ›
Vanguard Total Stock Market ETF VTI offers cost-efficient, well-diversified exposure to the entire US stock market—a recipe for success over the long run. The fund tracks the CRSP US Total Market Index, which represents approximately 100% of the investable US opportunity set.
Should I have both VOO and VTI? ›
Or, you could also invest in both, for example, by putting half in VOO and half in VTI. Here's a summary of which one to choose: If you want to own only the biggest and safest stocks, choose VOO. If you want more diversification and exposure to mid-caps and small-caps, choose VTI.
ETFs: ETF Database Realtime Ratings
| Symbol Symbol | ETF Name ETF Name | YTD YTD |
|---|
| VGT | Vanguard Information Technology ETF | 12.92% |
| VONG | Vanguard Russell 1000 Growth ETF | 14.35% |
| MGK | Vanguard Mega Cap Growth ETF | 14.11% |
| VBK | Vanguard Small Cap Growth ETF | 4.84% |
5 more rowsTop Institutional Holders
| Holder | Shares | Date Reported |
|---|
| Blackrock Inc. | 2.13M | Mar 31, 2024 |
| Dimensional Fund Advisors LP | 1.85M | Mar 31, 2024 |
| Vanguard Group Inc | 1.57M | Mar 31, 2024 |
| Wellington Management Group, LLP | 1.51M | Mar 31, 2024 |
6 more rowsVTI has a dividend yield of 1.35% and paid $3.54 per share in the past year. The dividend is paid every three months and the last ex-dividend date was Mar 22, 2024.
Is it safe to keep money in Vanguard? ›
Rest easy knowing the cash in your Vanguard Cash Plus bank sweep is eligible for FDIC coverage up to $1.25 million for individual accounts and $2.5 million for joint accounts. You can keep all your money in the bank sweep or diversify into 5 available Vanguard money market funds (each with a $3,000 minimum investment).
What is the downside of owning an ETF? ›
The single biggest risk in ETFs is market risk. Like a mutual fund or a closed-end fund, ETFs are only an investment vehicle—a wrapper for their underlying investment. So if you buy an S&P 500 ETF and the S&P 500 goes down 50%, nothing about how cheap, tax efficient, or transparent an ETF is will help you.
What is Vanguard's best performing fund? ›
Vanguard High-Yield Corporate Fund (VWEAX)
The Vanguard High-Yield Corporate Fund is the company's top performing bond fund over the past decade. It features a high-yield, intermediate-term fixed income portfolio.
What is the average return of Vanguard Total Stock Market ETF? ›
Quarterly after-tax returns
| Total Stock Market ETF | 1-yr | 5-yr |
|---|
| Returns after taxes on distributions and sale of fund shares | 17.64% | 11.35% |
| Average Large Blend Fund | |
| Returns before taxes | 27.24% | 13.65% |
| Returns after taxes on distributions | — | — |
3 more rowsVanguard High Dividend Yield ETF (VYM)
The better Vanguard ETF for their needs is likely VYM, which delivers a higher 2.9% 30-day SEC yield by targeting the FTSE High Dividend Yield Index. It also charges the same expense ratio as VIG does, at 0.06%.
Which is better, Voo or VTI? ›
Both have the same expense ratio and similar dividend yield, so you should choose whichever one you prefer based on the fund's strategy. If you only want to own the biggest and safest companies, choose VOO. If you want broader exposure and more diversification, choose VTI.
What is the difference between Vanguard Total Stock Market ETF and S&P 500? ›
You can't go wrong with either the Vanguard Total Stock Market ETF or the Vanguard S&P 500 ETF. Both offer very low expense ratios and turnover rates, and the difference in their tracking errors is negligible. The overlap in their holdings ensures that you'll get very similar returns going forward.
