Is the Vanguard US Total Market Shares Index ETF (ASX: VTS) a good long-term investment?
Vanguard is one of the best exchange-traded fund (ETF) providers in the world in my opinion. It’s great to be able to buy a whole group of shares in a single trade. But Vanguard in-particular is well-respected because of how it doesn’t try to profit from its investors because they are simultaneously Vanguard’s owners as well, but Vanguard lowers management fees instead of making a growing profit.
The Vanguard US Total Market Shares Index ETF is one of Vanguard’s biggest and best ETFs available to ASX investors.
Its purpose is to invest in, essentially, a lot of the US stock market. With this ETF you’re getting exposure to over 3,600 US share holdings. Obviously you own very little of the smallest businesses in the US index, but the idea is that you get even more diversification than with iShares S&P 500 ETF (ASX: IVV).
As with most international ETFs that include US shares, this ETF’s largest holdings are: Microsoft, Apple, Amazon, Alphabet, Facebook, Berkshire Hathaway, JPMorgan Chase, Johnson & Johnson, Exxon Mobil and Visa. Most of these businesses are some of the highest-quality shares in the world with almost impenetrable economic moats.
I think this ETF is much more evenly balanced than ASX ETFs, which are largely weighted to just financial and resource businesses. The Vanguard US Total Market Shares Index ETF has a 21% weighting to technology, 19.6% to financials, 13.8% to consumer services, 13.4% to industrials and health care has a 12.5% weighting.
There are two things I appreciate the most about this ETF. The first is that it has an extremely low management fee of 0.03%, which means almost all of the returns generated stay in the hands of the investor.
The other thing that I like is that the underlying revenue and profit generated are largely from the entire world, with a slant towards the US. But the bigger holdings make their money from most of the countries in the world. That leaves plenty of opportunity for growth and mostly mitigates country-specific risks.
You could do well from just investing in this ETF and nothing else over the long-term. For my portfolio, I think I’d only want to invest when there’s a US or global recession to hurt share prices.
Until then, I’d much rather invest in these hot stocks to try to beat the ASX share market.
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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.