Is the Vanguard US Total Market Shares Index ETF (ASX: VTS) a good long-term investment? I think it is and I'm going to tell you why in this article.
I believe that exchange-traded funds (ETFs) are a great way to get diversification with your portfolio. You can invest in a large group of shares with just one investment. Not every ETF is worthwhile investing in, but Vanguard US Total Market Shares Index ETF is in my opinion.
It essentially gives you exposure to most of the businesses listed in the US with around 3,600 holdings, with larger exposure to the biggest holdings like Microsoft, Apple, Amazon, Alphabet, Facebook, Berkshire Hathaway, Facebook, Berkshire Hathaway, Johnson & Johnson, JPMorgan Chase, Exxon Mobil and Visa.
One of the main reasons why I think this is an attractive long-term investment is that so many of this ETF's leading businesses are global businesses which generate earnings from across the world. This gives excellent earning power, stronger profit margins and more options for growth.
This ETF is also quite well balanced with health care, industrials, consumer services, financials and technology all having more than 10% of the ETF allocated to them. Technology had 20.2% of the sector allocation at the end of May 2019, which is probably the best sector for long-term growth.
One of the absolute best reasons to think about this ETF is that it has an exceptionally-low management cost of just 0.03%. This means you get to keep more of the investment returns yourself rather than paying it to an investment manager. Vanguard shares its profit with its shareholders, the investors, in the form of lower fees.
Over the past 10 years the ETF has returned an average of 16.35% per annum, showing that passive ETFs can generate strong returns when the market does well.
Foolish takeaway
I think this is one of the best ETFs you could hold in your portfolio, indeed it could be the only investment you hold. However, it only has a dividend yield of 1.8%.
