The Vanguard US Total Market Shares Index ETF (ASX: VTS) is one of the most popular exchange-traded funds (ETFs) on the ASX with a fund size of close to $3 billion. But what is it invested in?
The purpose of the ETF is to provide low-cost access to a broad range of US shares and "participate in their long-term growth potential", according to Vanguard.
ETFs can be very effective investment vehicles to invest in the share market and benefit from the (hopeful) capital growth over time.
Let's have a look at what makes up the VTS ETF's investments:
Holdings
Firstly, we'll look at the total number of positions in the portfolio. Some funds only have 10 or 20 positions. Other ETFs may have hundreds or even thousands of holdings.
At 31 May 2022, the Vanguard US Total Market Shares Index ETF had a total of 4,100 positions. This is one of the most diverse funds on the ASX in terms of the number of different businesses that it provides exposure to.
While the lower-ranked holdings may not make up much of the portfolio, the VTS ETF does have some significant investments in a few leading businesses.
These were the 10 largest positions at the end of May 2022: Apple, Microsoft, Alphabet, Amazon.com, Tesla, Berkshire Hathaway, Johnson & Johnson, UnitedHealth, Meta Platforms and Nvidia.
VTS ETF sector diversification
There's more to the investments than just how many holdings it has, it could also be worthwhile knowing which industries these businesses are in.
The Vanguard US Total Market Shares Index ETF is invested across a number of sectors.
At the end of May 2022, these were the following allocations:
Technology (25.9%)
Consumer discretionary (14%)
Health care (13.4%)
Industrials (12.8%)
Financials (11.5%)
Consumer staples (5.5%)
Energy (5%)
Real estate (3.7%)
Utilities (3.3%)
Telecommunications (2.6%)
Basic materials (2.3%)
My thoughts on the VTS ETF sector diversification
Having thousands of holdings spread across numerous sectors is good news in my opinion. I believe that the tech sector has good growth potential because of the increasingly technological nature of the world, meaning growing demand for those businesses. Plus, they earn good margins and the big tech players have strong balance sheets to protect and grow their businesses.
However, the one thing to keep in mind is that they are all businesses that are listed in the US.
If investors have an ASX share-focused portfolio, then the Vanguard US Total Market Shares Index ETF can be an effective way to boost geographical diversification. But then again, it's just invested in US shares, so investors wanting exposure to Europe or other markets may need to consider something else as well.
