Key Points
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The Vanguard Total Stock Market ETF (VTI) contains over 3,500 companies of all sizes and in all industries.
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VTI’s 0.03% expense ratio is one of the lowest that you’ll find on the stock market.
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VTI has outperformed the S&P 500 since its May 2001 inception.
Many people think investing in stocks is about hitting the jackpot on “the next big thing” and receiving generational gains. Of course, that would be nice, but sound investing can be much more predictable and straightforward. Instead of chasing individual winners, you can invest in the U.S. stock market as a whole and benefit from the long-term growth of the U.S. economy.
And the cherry on top is that it can be done through a single ETF like the Vanguard Total Stock Market ETF(NYSEMKT: VTI). It’s a one-stop shop that can be a “set-it-and-forget-it” investment for the long haul.
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One ETF covering a lot of ground at once
Many people are familiar with the S&P 500 — which tracks the largest 500 U.S. companies on the market — but VTI is much broader. It contains 3,507 companies, from mega-cap tech stocks to mid-cap stocks firmly in their growth phases to small-cap stocks that are picking up momentum.
Although VTI covers the entire U.S. stock market, it’s market-cap weighted, so larger companies still make up a considerable share. Eight of the top 10 holdings are “Magnificent Seven” stocks (including both Alphabet classes), so the tech sector is represented heavily:
- Technology: 36.3% of VTI
- Consumer Discretionary: 13.6%
- Industrials: 12.6%
- Financials: 10.7%
- Health Care: 9.7%
- Energy: 4.3%
- Consumer Staples: 3.7%
- Utilities: 2.8%
- Real Estate: 2.4%
- Telecommunications: 2.1%
- Basic Materials: 1.8%
It’s not the most diversified ETF from a sector standpoint, but it’s as broad an ETF as you’re going to find on the market.
VTI ensures you keep more of your gains for yourself
VTI has historically performed in line with the S&P 500. Since the ETF hit the market in May 2001, it has averaged 7.6% annual returns and 9.5% annual total returns. The S&P 500’s annual averages in that time are 7.3% and 9.3%, respectively.
If we assume VTI continues to offer those average annual returns (emphasis on “assume” because we can’t predict how any stock or ETF will perform), here is how much different monthly investments would grow to over 20 years:
| Monthly Investment | Value After 20 Years |
|---|---|
| $100 | $64,727 |
| $250 | $161,818 |
| $500 | $323,635 |
| $1,000 | $647,271 |
| $1,500 | $970,906 |
Calculations by author.
These returns take into account VTI’s 0.03% expense ratio, one of the market’s lowest. If the fee stays the same, then investing $100 a month over the next 20 years could cost you as little as $219 in fees. Fees are often overlooked, but they matter over time. VTI checks two key boxes as an investment: it offers instant diversification and it’s cheap.
Should you buy stock in Vanguard Total Stock Market ETF right now?
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Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.
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