The Vanguard US Total Market Shares Index ETF (ASX: VTS) is one ASX-listed exchange-traded fund (ETF) that has gone through a sizeable dip in price recently. As the chart below shows, the VTS ETF unit price is down 7.53% since market close on 31 January 2025.
Lower prices are normally a good sign for investors who want to buy shares. As the legendary investor Warren Buffett once said in his 1997 annual letter:
If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period?
Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall.
Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.
So, with that in mind, let's consider why now might be a good time to invest in this fund, which provides exposure to the US share market.
Better value
I like investing when prices are cheaper because it means I get more for my dollars.
With the VTS ETF down, we're able to obtain more units than we would have if we had invested in January.
The sell-off appears to have been largely caused by market worries about the tariffs imposed by the US Trump administration on Canada, Mexico, and China, and the threat of possibly imposing tariffs on the rest of the world.
It's an unsettling time for the market, but I believe this could be a longer-term buying opportunity. If the market were to fall even further, then I'd say it's an even better time to buy.
We can't know how far the market will fall without a working crystal ball. But the long-term profit growth of the businesses inside this fund makes me believe it can continue to rise, even if the short term is volatile.
Incredible businesses
Many of the world's strongest businesses can be found on a US stock exchange – this fund gives exposure to those impressive companies.
If you were to create a portfolio of which businesses have the strongest market positions, the widest global reach, the biggest research and development budgets, the healthiest balance sheets, and the strongest profits – many of the names from the VTS ETF portfolio would likely feature.
While I'm not expecting rapid profit growth from here over the next few years, I think many of these businesses are capable of introducing new services and products and releasing the latest versions of their existing core offerings to boost revenue and earnings.
The portfolio's current largest positions include Apple, Microsoft, Nvidia, Amazon.com, Alphabet, Meta Platforms, Tesla, Broadcom, and Berkshire Hathaway.
I expect most, if not all, of the above businesses, will be around in a decade and will likely be larger companies than they are today because of that ongoing profit growth over time.
But, this portfolio isn't just about those major companies. This fund has more than 3,600 positions, which means it has a lot of underlying diversification. There are a number of other compelling businesses in the portfolio, including Visa, Costco, Intuitive Surgical, and Netflix.
The VTS ETF has extremely low costs
One of the best reasons to like this fund is due to its incredibly low management cost.
All ASX ETFs and actively managed funds charge some sort of fee. The VTS ETF is a leader in terms of low-cost ASX ETFs – the annual management fee is just 0.03%. That means that almost all of the gross/total returns stay in investors' portfolios rather than being taken by fund managers.
When you consider that the VTS ETF has returned an average of 16.3% per year since inception (May 2009) to 31 January 2025, the fees seem even more attractive. Few ASX ETFs have performed close to that level of strength in the short term or long term. Of course, past performance is not a guarantee of future performance, but the quality of the businesses in this fund makes me think it has an exciting future.
