Is Vanguard US Total Market Shares Index ETF (ASX:VTS) the best place to invest your money for 2020?
The US share market has been a very strong performer over the past decade as investor sentiment grew and US earnings increased. Over the past decade this exchange-traded fund (ETF) has returned an average of 16.2% per annum.
Those returns have been driven by the US' biggest businesses. In Australia the blue chips have been sluggish but in the US the growth has been created by those big businesses. I'm talking about shares like Microsoft, Apple, Alphabet, Amazon, Facebook, Berkshire Hathaway, Visa, MasterCard and banks like JPMorgan Chase.
Not only is this ETF invested in some of the best businesses in the world, we get this excellent exposure for a very cheap price. Vanguard only charges investors annual costs of 0.03% per annum, which is extremely cheap for an internationally-focused investment.
The question is, should new money be put towards this ETF?
Market bull runs don't go on forever, they stop at some point. But no-one knows when the next downturn will be. It could be next quarter, it could be five years away or even longer. There's no rule that says the world or the US must have a recession every decade.
The US economy is incredibly strong at the moment despite the trade war with China. A strong US economy means strong earnings for businesses and good returns for US shares, which is why the US unemployment rate is so low and why this ETF returned 24.6% in the year to November 2019.
Time to buy shares?
I don't think the ETF looks so expensive that I wouldn't want to buy any shares at all. The index's p/e ratio is around 22 which seems quite high, but the near-term growth prospects for the US look good and the biggest businesses like Alphabet, Facebook and Microsoft have very promising growth prospects with strong growth year after year.
However, if I had a large lump sum to invest I wouldn't want to put a majority of it in at today's prices.
I'd much rather spread my investment across different shares at better prices such as Pushpay Holdings Ltd (ASX: PPH) and these top ASX growth shares.
