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Is the Vanguard Us Total Market Shares Index ETF the best passive option on the ASX?

Is Vanguard Us Total Market Shares Index ETF (ASX: VTS) the best exchange-traded fund (ETF) on the ASX?

Passive investing has grown significantly in recent years and is now one of the most popular ways to invest for investors.

Being able to invest in a broad group of shares with just one brokerage fee is very attractive. The US share market has been perhaps the best place to be invested over the past few decades with how strongly the US economy and its biggest businesses have performed.

With this ETF you have the opportunity to be invested in nearly 3,600 businesses, which is most of the value of businesses listed in the US. The sector allocation is quite even with technology, financials, industrials, consumer services and health care all having more than 10% of the ETF’s allocation.

The largest holdings of the ETF are many of the best blue chips in the world including Microsoft, Apple, Amazon, Facebook and Berkshire Hathaway.

Over the past five years this ETF has generated an average return per annum of 15.31%, which is a great return from an ETF.

I think there are two main positives to considering this ETF over an Australian one like Vanguard Australian Share ETF (ASX: VAS). The first is that the underlying earnings are generated from across the world – for example, Microsoft software is used in offices globally after all. Australian businesses are mostly focused on just Australia and New Zealand.

The second reason is that the US businesses are generating much higher growth and they’re re-investing back into themselves for even more growth over the longer-term. The dividend yield for the US market is lower because the dividend payout ratio is a lot lower.

Foolish takeaway

I wouldn’t want to invest my entire wealth into this ETF at today’s price, but I’d happily consider a monthly or quarterly investment plan with this one. It would be entirely possible to just own this ETF and nothing else because of how diverse it is.

But, you want quality growth and income from your investments then these leading ASX shares could be worth considering.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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