The Vanguard Total Stock Market ETF (NYSEARCA: VTI) tracks the performance of the CRSP U.S. Total Market Index. The fund has returned 6.23% since its inception in 2001. The fund is a market capitalization-weighted index that measures the entire investable U.S. equities market. It includes small-, mid- and large-cap companies. The fund is managed in a passive manner and uses an index-sampling strategy.
The fund has over 3,800 stocks in its portfolio, a massive amount for an ETF. The median market cap of the fund's holdings is $51.1 billion. The price-to-earnings (P/E) ratio of the holdings is 21.9, with a price-to-book (P/B) ratio of 2.8. 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 financial sector has the highest weighting in the fund at 18.9%, followed by the technology sector with a weighting of 16.1%. The health care sector is in third with a weighting of 14%, with consumer services having a weighting of 13.8%. Apple (NASDAQ: AAPL) was the largest holding as of June 2015 with a 3.2% weighting, followed by Exxon Mobil (XOM) with a 1.5% weighting. Microsoft (MSFT) was the third-largest holding with a weighting of 1.4%, while Google (NASDAQ: GOOG) was the fourth-largest holding with a weighting of 1.3%. The top 10 holdings had a combined weighting of 14%.
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 0.05%. This is 95% lower than the average expense ratios of similar funds. The fund has a very low turnover rate of 2.9%, meaning that there are limited transaction costs for changing the fund's holdings. The expense ratio does not include any commissions or other brokerage fees. The low expense ratio is beneficial for long-term investors in the fund.
Shares are trading around $109 as of July 2015. The fund has an average daily volume of 2.56 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.
Suitability and Recommendations
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 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. Still, the fund has a trailing three-year standard deviation of 9.8%, which is not very volatile. Standard deviation is a measure of the dispersion of the fund's returns.
The fund has performed well recently following the larger bull run in equities. VTI has had one-year returns of 7.2% with five-year returns of 17.57%. The fund has had a solid Sharpe ratio of 2.29.
This ETF is a good asset to hold in a growth portfolio, since it 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.