The exchange-traded fund (ETF) Vanguard US Total Market Shares Index ETF (ASX: VTS) is one of the most popular ETFs around â the ETF size was $3 billion at the end of February 2023.
It provides exposure to some of the worldâs largest companies, listed in the US. Vanguard US Total Market Shares Index ETF aims to offer âlow-cost access to a broadly diversified range of securities that allows investors to participate in their long-term growth potential”.
There are a few good reasons to consider the ETF, which is why I think itâs a good buy for the long term.
Diversification
I think this is one of the most diversified ETFs around. It has around 4,000 holdings in the portfolio. Just having 100 holdings is ample diversification as long as the businesses are spread across different sectors. To have 4,000 positions is significant.
While all of the businesses are listed in the US, the companiesâ underlying earnings come from across the world. Just picture a business like McDonaldâs â it generates earnings from more than 100 countries.
I like the diversification of the sector allocation too. Technology is a growth area, so itâs good that the Vanguard US Total Market Shares Index ETF has a tech share weighting of 23.4%. Other sectors that have sizeable allocations include healthcare (15%), industrials (13.7%), consumer discretionary (13.2%), financials (11.9%), consumer staples (6%), and energy (5.3%).
Growth
I think the ETF has good growth potential, as it has already demonstrated. Over the past five years, it has returned an average of 12.6% per annum.
In my opinion, names like Apple, Microsoft, Alphabet, Amazon.com, and Berkshire Hathaway can continue to deliver above-average growth over the long term.
Many of the ETFâs larger holdings are targeting a global market, giving them huge target markets. The longer the runway, the more the businesses can potentially rise.
By holding around 4,000 businesses, the fund is also potentially invested in the next business thatâs going to storm higher.
Low fees
The Vanguard US Total Market Shares Index ETF has an extremely low management fee of just 0.03%. Thatâs essentially nothing. Almost all of the gross returns turn into net returns thanks to the very reasonable fee.
There are very few ETFs on the ASX that can compete with that cheap price. The iShares S&P 500 ETF (ASX: IVV) has an annual management fee of just 0.04%. The BetaShares Australia 200 ETF (ASX: A200) also has an annual management fee of 0.04%.
Foolish takeaway
I think that Vanguard US Total Market Shares Index ETF is one of the most effective ways to invest in international shares. The fact that the portfolio is regularly changing means investors donât need to worry about what to buy or sell with this investment.
The post 3 reasons why I rate the Vanguard US Total Market Shares Index ETF (VTS) as a buy today appeared first on The Motley Fool Australia.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Foolâs board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Foolâs board of directors. Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon.com, Apple, Berkshire Hathaway, and Microsoft. The Motley Fool Australia has recommended Alphabet, Amazon.com, Apple, Berkshire Hathaway, and iShares S&p 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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