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What Is the Vanguard Total Stock Market ETF(VTI)?
The Vanguard Total Stock Market ETF (VTI) tracks the performance of the CRSP U.S. Total Market Index. The fund has returned 510% since its inception in 2001 (as of Feb. 11, 2024). The fund is a market capitalization-weighted index that measures the entire investable U.S. equity market. It includes small-, mid-, and large-cap companies. The fund is managed in a passive manner and uses an index-sampling strategy.
Key Takeaways
- The Vanguard Total Stock Market ETF is a well-diversified exchange-traded fund (ETF) that holds over 3,700 stocks.
- The ETF’s top sector is technology, with a 27.7% weighting, while Microsoft, Apple, and Alphabet are its top three holdings, making up 13.2% of the ETF.
- It has a low expense ratio (0.03%) and tracks the broader stock market very closely (beta of 1), making it a low-cost way to get exposure to the U.S. equity market.
Understanding Vanguard Total Stock Market ETF(VTI)
The Vanguard Total Stock Market ETF is an open-ended fund issued by Vanguard and advised by the Vanguard Equity Investment Group. The fund is a passive index fund and therefore has a remarkably low expense ratio of 0.03%. The fund has a relatively low turnover rate of 8%, meaning that there are limited transaction costs for changing the fund’s holdings. The expense ratio does not include any commissions or brokerage fees. The low expense ratio is beneficial for long-term investors in the fund.
Shares are trading around $248 as of February 2024. The fund has an average daily volume of 2.4 million shares, indicating that there is a great deal of liquidity in the ETF. VTI shares trade on the New York Stock Exchange. Investors can buy shares with no commission through Vanguard Brokerage Services.
Holdings of Vanguard Total Stock Market ETF(VTI)
The fund has over 3,750 stocks in its portfolio, a massive amount for an ETF. The median market cap of the fund’s holdings is $149.3 billion. The weighted average price-to-earnings (P/E) ratio for the portfolio is 22.9, with a price-to-book (P/B) ratio of 3.9. The P/E ratio takes the current market value of companies’ shares divided by the earnings per share (EPS). The P/B ratio takes the share price divided by the total liabilities minus intangible assets and liabilities.
The technology sector has the highest weighting in the fund at 31%, followed by the consumer discretionary sector with a weighting of 14.5%. The industrial care sector is in third with a weighting of 13.1%.
Apple (AAPL) is the largest holding with a 6.1% weighting, followed by Microsoft (MSFT) with a 6.0% weighting. Amazon (AMZN) is the third-largest holding with a weighting of 3.0%, while Nvidia (NVDA) is fourth with a 3.2% weighting. The top 10 holdings had a combined 26.4% of the fund’s holdings (As of Feb. 11, 2024).
$1.5 trillion
The total assets in the Vanguard Total Stock Market ETF (VTI), as of Feb. 11, 2024.
Benefits of Vanguard Total Stock Market ETF(VTI)
VTI is an extremely diversified fund. Its large amount of holdings reflect the entire universe of investable U.S. securities. The fund has exposure to small-cap stocks which can be more volatile than mid- or large-cap holdings. The fund has a beta of 1.0 when compared to the larger market. The fund has exposure to systematic risk, which is the risk inherent in the entire market. A larger downturn in the U.S. economy or the world economy is likely to impact the value of the fund.
The fund has performed well recently following the larger bull run for equities. As of February 2024, VTI has a one-year return of 19.2% with a five-year return of 13.4%. This ETF reflects the larger universe of U.S. equities in a low-cost single fund. Investors need to include other assets that are not as correlated to the stock market so they can balance their portfolios. Pursuant to the tenets of modern portfolio theory, holding non-correlated assets can help to minimize portfolio risk.
What Is the Average Annual Return of VTI?
The Vanguard Total Stock Market ETF (VTI) has had an average annual return of 8.3% since its inception in 2001.
How Much Do I Need to Invest in VTI?
Generally, the minimum investment for an exchange-traded fund is one share, which for VTI costs $248 as of February 2024. However, some brokers may allow investors to purchase fractions of a share.
Does VTI Pay a Dividend?
Yes, VTI pays a dividend every three months, with an annual dividend yield of 1.38%. The last dividend payment was paid out on Dec. 21, 2023, with a dividend of $1 per share.
The Bottom Line
The Vanguard Total Stock Market ETF is a popular way to save for retirement or long-term growth. The fund represents a snapshot of the stock market, allowing investors to track the gains of the market as a whole rather than invest in individual shares. Like many other index ETFs, it has an extremely low expense ratio, because its management costs are lower than actively managed funds.
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