Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you — and also to invest in the overall market. If you expect that the world's economies will grow over time, boosting the value of the world's public companies, the Vanguard Total World Stock Market Index ETF (NYSE: VT ) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in thousands of them simultaneously.
ETFs often sport lower expense ratios than their mutual fund cousins. The Vanguard ETF's expense ratio — its annual fee — is a very low 0.25%.
It's a bit silly to compare this ETF's performance to the market, since it is the market. Instead, you might compare your alternative investments to it and see which has fared better. Remember, too, that as with most investments, we can't expect outstanding performances in every quarter or year; Investors with conviction need to wait for their holdings to deliver.
And with a very low turnover rate of 7%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
What's in it?
As you'd expect in any market, some stocks did well while others did poorly. Philip Morris International (NYSE: PM ) gained 44%, serving a growing global population. It and other tobacco companies face profit-threatening regulations and lawsuits, but they fight back, too, recently challenging Australia's plan to remove logos from packaging.
Intel (Nasdaq: INTC ) , up 26%, is a cyclical stock, but it's not looking overvalued yet. It's also a formidable competitor, spending twice as much on R&D and capital expenditures last year as its top rival Advanced Micro Devices generated in revenue!
U.K.-based telecom giant Vodafone (Nasdaq: VOD ) gained 10%, and is a big dividend payer, while holding a 45% stake in Verizon Wireless. With operations all over the globe, many investors are bullish on its future, but it does carry a lot of debt, owing more than $50 billion.
Other companies didn't add as much to the ETF's returns last year; however, they could have an effect in the years to come. General Electric (NYSE: GE ) gained just 4%, but its future seems quite promising. As my colleague Rich Smith has noted, GE "has been working hard to retool its business model — rehiring manufacturing workers at its appliances business, selling off its riskier finance units, and making big inroads into the business of Big Oil — and the potentially even bigger business of electric-car charging."
The big picture
A well-chosen ETF can grant you instant diversification across any industry or group of companies, as well as make investing in and profiting from it that much easier.