Key insights
- The article suggests investing in the Vanguard Total Stock Market ETF (VTI) as a strategy to navigate current market anxieties stemming from geopolitical events, inflation, and high valuations. VTI offers broad exposure to nearly all U.S. companies, though it is becoming tech-heavy due to market-cap weighting. While not a direct prediction of immediate market movement, the recommendation implies a neutral to slightly positive long-term outlook on the U.S. economy and equity market, suggesting that broad market exposure is a prudent approach for investors seeking steady wealth accumulation over time.
Between the war in Iran, inflation, and concerns about inflated stock valuations, many investors are anxious about what the future holds. That's why owning a piece of the whole U.S. stock market instead of trying to find the "winners" could be a good idea right now.
And there's no better way to do that than to invest in the Vanguard Total Stock Market ETF (VTI +0.26%). Many ETFs can be one-stop shops, but few cover as much ground as VTI. If you have $100 to invest, it's a great set-it-and-forget-it choice.
When you invest in VTI, you're investing in virtually every American company trading on the market. It contains 3,494 stocks of all sizes and across all sectors, but it has become tech-heavy recently because it's weighted by market cap, and megacap tech stocks have exploded in valuation in the past few years. Here are VTI's top 10 holdings:
Ten companies accounting for over a third of a nearly 3,500-stock ETF isn't quite a textbook example of diversification, but that has been the trajectory of most major indexes, including the S&P 500. VTI and the S&P 500 have the same top 10 holdings, but the S&P 500 only contains large-cap stocks. VTI provides exposure to mid-cap and small-cap stocks, which come with their own set of growth opportunities.
Investing in a broad ETF like VTI might not be as sexy as investing in "the next big thing," but it has proven to be a wealth-builder over time. Since it hit the market in May 2001, VTI has averaged 7.8% annual returns (9.7% when including dividends). That's not enough to make you a millionaire overnight, but it's slightly better than the S&P 500's 7.5% average over that time (9.5% with dividends).
Over the past decade, VTI has averaged 13.2% annual returns, so being broad doesn't have to mean sacrificing good gains. We can't predict how it will perform going forward, but investing in VTI is essentially a bet on the long-term growth of the U.S. economy. Nothing is guaranteed, but I'll take that bet 10 times out of 10.
A bonus is that VTI's expense ratio is only 0.03%, or $0.03 per $100 you have invested. That's one of the cheapest fees that you'll find from any ETF on the market, leaving more gains in your pockets instead of Vanguard's. VTI is straightforward, productive, and cheap -- it's hard to beat it.