The Vanguard US Total Market Shares Index ETF (ASX: VTS) looks to me like a very compelling exchange-traded fund (ETF) and it could make a solid long-term investment.
There are plenty of different ways to invest in the US share market, or at least the biggest US stocks. The iShares S&P 500 ETF (ASX: IVV) is one of the most well-known funds and is an appealing pick too.
But, there are a few things that make the VTS ETF a uniquely attractive fund. I'll run through those appealing attributes.
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Extremely low costs
The VTS has such a low management cost, it's virtually zero.
Vanguard, the provider of this fund, charges investors 0.03% annually. That makes it slightly cheaper than the IVV ETF, which is very impressive.
Owning an ASX ETF is predominantly about making the best investment returns, so the fees make a noticeable difference to the net returns.
We can't control what the gross returns from the portfolio is going to be, but we can take note of how much the returns are reduced by the fees. Low fees are one of the main reasons why ETFs are regularly able to beat the net return of some investment professionals.
Very diversified
The S&P/ASX 200 Index (ASX: XJO) obviously gives investors exposure to 200 businesses.
The S&P 500 gives investors exposure to 500 businesses. That's a lot.
But, the VTS ETF is invested in more than 3,500 holdings. That's because it's invested in most of the market capitalisation of the US stock market, not just the biggest companies.
Owning this many businesses means the fund is invested in the rising stars of the US share market and it receives that benefit, rather than waiting until that business is relatively large to enter the S&P 500.
I also like that Vanguard fund is invested across a number of sectors including technology, consumer discretionary, industrials, financials, healthcare and so on. Pleasingly, the technology stake is the largest, which is probably the best sector to have exposure to with its growth potential and typically above-average profit margins.
High-quality portfolio
The VTS ETF owns some of the best businesses in the world in its portfolio including Microsoft, Nvidia, Apple, Amazon.com, Alphabet, Meta Platforms, Broadcom, Berkshire Hathaway and so on.
These are businesses with globally strong market positions, great balance sheets, impressive profit margins and ongoing revenue growth.
The financial metrics certainly show the compelling nature of this portfolio.
According to Vanguard's latest monthly update, its portfolio had an earnings growth rate of 21.3%, which is a fast rate of growth and justifies a higher share price over time. It also has a very high return on equity (ROE) ratio of 23.4%, which suggests quality and good potential returns for reinvested profit in the coming years.
It's not an accident that the VTS ETF has returned an average of 17% per year over the last five years. I think the fund can deliver good returns in the long-term.
