VTI is an extremely popular ETF to capture the entire U.S. stock market. Is it a good investment? I review it here.
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VTI – What, Why, and How
VTI is the Vanguard Total Stock Market ETF. It launched in 2001. As the name suggests, the fund captures the entire investable U.S. stock market in the form of over 4,000 holdings across large, medium, and small stocks. It does so by tracking the CRSP U.S. Total Market Index, which is market cap weighted.
In case you didn’t know, Vanguard is the go-to for reliable and highly liquid index funds with the lowest fees. If you’ve landed here, hopefully you do already know that passive indexing is a great way to diversify your investment portfolio and avoid stock picking and sector bets, which tend to be fool’s errands.
Most are familiar with the famous S&P 500 index, which is comprised of the 500 largest U.S. stocks, and for which Vanguard’s ETF offering is VOO. But some don’t realize that VTI can be considered more diversified with more holdings and more cap sizes. Specifically, VTI is roughly 82% large caps, 12% mid caps, and 6% small caps. Small stocks are riskier than large stocks, so investors expect to be compensated with greater returns for holding these smaller stocks in VTI. I compared VOO and VTI in detail in a separate post here.
At the time of writing, here are some quick stats on VTI:
- AUM: $245B
- Expense Ratio: 0.03%
- Volume: $1.01B
- P/E Ratio: 23.16
- P/B Ratio: 3.85
- Dividend Yield: 1.61%
- Holdings: 4,028
Is VTI a Good Investment? Of Course!
VTI is indeed a good investment in the sense that stocks in general tend to be a good investment. After all, VTI is the entire U.S. stock market. Historically it has had an annualized return of about 10% with volatility of about 15%:
VTI is a great one-fund solution for U.S. investors to be well-diversified across styles and cap sizes. Don’t mistake this broad diversification as meaning VTI is low-risk, though. Stocks are risky investments by their very nature; that’s why we invest in them. Notice the drawdown of nearly 51% during the fund’s lifetime.
Conveniently, as is the Vanguard way, the fund is also very affordable at only 0.03% and has low turnover. This saves the long term investor big bucks on fees and trading costs over their lifetime. VTI also has an Admiral Shares mutual fund equivalent VTSAX.
The only other thing to keep in mind is that it’s likely wise to diversify globally in stocks instead of solely investing in one single country. To do that, a popular fund from Vanguard for international stocks is VXUS, which captures all stocks outside the United States.
What do you think of VTI? Do you own it in your portfolio? Let me know in the comments.
Disclaimer: While I love diving into investing-related data and playing around with backtests, I am in no way a certified expert. I have no formal financial education. I am not a financial advisor, portfolio manager, or accountant. This is not financial advice, investing advice, or tax advice. The information on this website is for informational and recreational purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. Do your own due diligence. Past performance does not guarantee future returns. Read my lengthier disclaimer here.
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