A total market index fund is nothing but an exchange traded fund (ETF) or a mutual fund whose job is to track an equity index as its benchmark. Some popular equity indices are Russell 3000 Index, the S&P 500, or the Wilshire 5000 Total Market Index. A total market index fund’s performance is aimed at mirroring the index that it is using as a benchmark. It does so by investing in the stocks which are linked with a particular index. The underlying stocks that these types of funds invest in are often highly diverse and may include both large-cap stocks issued by well-known corporations, as well as small-cap stocks issued by lesser-known companies. The Vanguard US Total Market Index ETF is one of the best Vanguard funds available today. The Fund’s portfolio is quite diverse. At 18.9%, Technology companies hold the largest share of the portfolio. 16.5% of the portfolio consists of Financial Services companies while 14.4% is made up of Healthcare companies. The top five sectors are rounded off by Industrial and Consumer Cyclical companies with 10.6% and 9.8% allocations, respectively. It is considered a large-cap blend, evidenced by its top five holdings: Microsoft Corp., Apple, Inc., Amazon.com, Facebook Inc A, and Alphabet Inc A. Co-incidentally, the top 10 holdings cover 20% of VTSMX’s assets.
Vanguard US Total Market Index ETF: Key Stats
Assets under management (AUM): $736.7 billion
2019 return: 30.65%
Expense ratio: 0.14%
Vanguard US Total Market Index ETF seeks to track the performance of the CRSP US Total Market Index, providing investors with exposure to a broadly diversified collection of securities that, approximates the full Index in terms of key characteristics when aggregated.
If you invest in Vanguard US Total Market Index ETF, it will provide exposure to some of the world’s largest firms that are listed in America. Another benefit of Vanguard US Total Market Index ETF is the low cost access to a highly diversified range of securities. These help a lot with long-term growth.
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The Vanguard US Total Market Index ETF is highly suitable for buy and hold investors who are looking for the following:
- Long-term capital growth
- Some income
- International diversification
Another key aspect is a slightly high risk tolerance of the investor to handle market volatility.
What are the benefits of investing in Vanguard US Total Market Index ETF?
Competitive long-term performance
The tried and tested investment approach of Vanguard helps investors capture long-term market performance.
By investing in a diversified portfolio, the Fund is less susceptible to the performance fluctuations of individual securities.
Low cost investing
The ongoing fees associated with the Fund are low.
What are the risks associated with investing in Vanguard US Total Market Index ETF?
Before investing in the stock market, you must always remember that the value of your investments can rise and fall with time. While the Fund has performed well over the years, returns are not guaranteed and investors can lose some of their money. The level of risk you want to expose yourself to, depends on factors such as age, investment time frame, and risk tolerance.