If you're looking for just one exchange-traded fund to own in your portfolio, the Vanguard Total Stock Market ETF is still one of your best bets. This fund covers a wide swath of the domestic stock market, giving you exposure to more than 1,000 companies in one swoop. What better way to get broad-market exposure for a rock-bottom cost?
|Fund Name & Ticker||
Vanguard Total Market Stock ETF
|Fund Objective||The fund employs a passive management strategy to track the MSCI US Broad Market Index, which consists of all common U.S. stocks traded on the New York Stock Exchange and Nasdaq over-the-counter market.|
|Assets Under Management||$150.4 billion*|
*Includes both ETF and mutual fund assets.
**Aggregate P/E for all fund holdings.
On the winning track
Since the fund was first recommended as a core ETF last fall, Vanguard Total Stock Market ETF has risen roughly 13.5%, compared to the S&P 500's 12.5% gain. That's not a huge difference, but even a single percentage point can add a lot to your portfolio over time. The reason for this outperformance comes from the fund's nearly 30% allocation to mid- and small-cap names, which have outpaced their large-cap brethren in recent months. This won't always be the case, but over the long run, the fund's wider mandate means it should stay just ahead of a large-cap-focused index like the S&P 500.
It's important to remember that this fund's directive isn't to outperform the market, but merely to track the path of the broader U.S. stock market, including mid- and small-caps. And over its almost 10-year life, the fund has accomplished that goal admirably, posting a 3.1% annualized gain since its May 2001 inception. That's more than double the return of the average large-cap blend fund in the Morningstar universe, and it speaks to the importance of having a diversified portfolio that covers all the stops in the market capitalization spectrum.
Big-name blue chips like ExxonMobil, Apple, and Microsoft still take center stage here, and they'll continue to dominate the fund's largest positions, thanks to the underlying index's market cap-weighting scheme. However, mid-cap and small-cap names still have enough presence here to make a difference in performance.
Vanguard Total Stock Market ETF retains it low 0.07% price of admission. That makes it one of the absolute cheapest options around for wide-ranging stock market exposure. It's hard to go wrong with such a low-cost, broad market exchange-traded fund, and this fund is still one of the best options around. If you have just one ETF in your portfolio, make it this one.
Amanda Kish is the Fool's resident fund advisor for the Rule Your Retirement investment newsletter. You can start your free 30-day trial today to the service today.At the time of publication, Amanda did not own any of the funds or companies mentioned herein. The Fool has written puts on Apple, which is a Motley Fool Stock Advisor selection. Motley Fool Options has recommended a diagonal call position on Microsoft, which is a Motley Fool Inside Value recommendation. The Fool owns shares of Apple, ExxonMobil, and Microsoft. Try any of our Foolish newsletter services free for 30 days.
We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
More from The Motley Fool
3 Top Index Funds for Your IRA
Investors who want exposure to a lot of stocks for not a lot of money ought to consider investing in these index ETFs.
3 ETFs to Help You Build Retirement Wealth
These three ETFs represent a time-tested approach to investing to build your retirement nest egg.
3 ETFs to Keep You Invested After Retirement
Diversification, low fees, and a host of investment choices make ETFs a great alternative after retirement.