An ETF to Match the Market
Vanguard Total Stock Market owns almost every publicly traded U.S. company worth at least $10 million.
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If you just wanted to duplicate the U.S. stock market, you’d buy a fund that mimics Standard & Poor’s 500-stock index, right? Well, not exactly. The S&P index consists of 500 companies, most of them large. If you wanted to track the entire U.S. stock market, you’d need to own a fund that follows a total-market index.
Why not stick with the familiar 500? Because a total-market index holds more small and midsize companies, and over the long term those stocks have performed better than big-company stocks. Over the past 15 years, including so far in 2013, the Wilshire 5000 Total Market index, the best-known of the broad-market indexes, has beaten the S&P 500 11 times.
Vanguard Total Stock Market ETF (VTI), the largest of the all-market exchange-traded funds, marches to a different beat. In June 2013, Vanguard switched from tracking one less-popular benchmark, the MSCI US Broad Market index, to another, the CRSP U.S. Total Market index. Vanguard said at the time that the move would allow it to cut fees on Total Stock Market ETF, which today charges a microscopic 0.05% per year in expenses.
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The ETF holds 3,639 stocks, representing nearly all U.S.-based firms with market values of at least $10 million. According to Morningstar, 19% of its assets are in midsize companies, 6% in small companies and 2% in “micro caps.” The ETF’s biggest holding is Apple; the smallest, Allen Organ.
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