The one thing that the ETF marketplace does exceedingly well is offer everyday investors the ability to construct broadly diversified portfolios easily and at almost no cost. No matter what your goal -- retirement, saving for a house, or anything really -- there's an ETF that can work effectively in your favor.
In my opinion, the best "set it and forget it" funds provide broad enough coverage that they can survive multiple market environments, yet are cheap enough that investors keep all of their returns virtually to themselves. In my opinion, the best ETF for this is the Vanguard Total Stock Market ETF (VTI 1.60%).
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How the Vanguard Total Stock Market ETF fits the "set it and forget it" objective
This ETF gives people a way to invest in virtually the entire U.S. stock market. It tracks the CRSP US Total Market Index and includes roughly 3,500 individual stocks, including large-, mid-, small-, and even micro-cap stocks.
While a lot of investors right now are choosing the Vanguard S&P 500 ETF (VOO 1.53%) for its broad market coverage, I think going even broader is the better move.
It's true that the S&P 500 (^GSPC 1.52%) is probably the most recognizable brand on Wall Street, and people tend to drift toward what they're familiar with. And the large caps in that index have consistently outperformed smaller stocks for several years, and past performance is a heavy influencer of investor behavior.
But I prefer a portfolio that's more comprehensive. Around 25% of the Vanguard Total Stock Market ETF's portfolio consists of stocks that are not large caps, providing diversification and exposure to areas of the market that can zig when the S&P 500 zags.
2026 is demonstrating why diversification still works
The Russell 2000 index, which is a widely accepted benchmark for small-cap stocks, just outperformed the S&P 500 in 14 consecutive trading days. That's something that hasn't happened in 30 years. But the current market rotation has benefited far more than just small companies. Value, low-volatility, and dividend stocks are all beating the S&P 500 so far in 2026.
The large-cap universe is heavily tilted toward tech stocks and the "Magnificent Seven." The rest of the U.S. stock market has a very different sector allocation. The Russell 2000, for example, has its largest allocations in industrials, healthcare, and financials. Tech is only the index's fourth-largest sector exposure.
As a result, the Vanguard Total Stock Market ETF is outperforming in the early stages of this year.
NYSEMKT: VTI
Key Data Points
Given how non-S&P 500 companies have led the market for such a long time, the return of small caps and total stock market funds could begin taking the lead again.
Plus, this ETF charges an expense ratio of just 0.03%, making it one of the most cost-effective options for investors. If there was ever a "set it and forget it" fund for your portfolio, the Vanguard Total Stock Market ETF might be it. And if you can invest enough for long enough, it could make you a multimillionaire with virtually no effort.
