People invest in total market ETFs simply because they do not have the training, time or motivation to consistently and constantly pick out sub-indexes. The experts also argue that trying to beat the market brings about higher risks than the potential for rewards.
Total market ETFs are also an appealing option if you simply want a one-stop shop. The number of ETFs that deliver such an all-encompassing strategy has exploded in recent years.
Low-cost total market ETFs include:
- Vanguard Total Stock Market ETF (AMEX: VTI); annual fees: 0.07%.
- SPDR Dow Jones Wilshire Total Market ETF (NYSEArca: TMW); annual fees: 0.2%.
- iShares Russell 3000 ETF (NYSEArca: IWV); annual fees: 0.2%.
ETFs based on broad indexes include more small-caps; thus, tend to have improved diversification, lower average market cap, higher average growth rates, and higher risk.
International total market ETFs include:
- Vanguard Total World Stock ETF (NYSEArca: VT), annual fees: 0.25%; VT tries to reflect the FTSE All-World Index of about 2,900 stocks in 47 countries, with 44% of holdings in the US.
- SPDR MSCI ACWI ex-US ETF (NYSEArca: CWI); annual fees: 0.35%; CWI tries to reflect the global publicly traded companies outside the US.
- SPDR S&P World ex-US ETF (NYSEArca: GWL); annual fees: 0.35%; GWL is very similar to CWI. This global (except US) total stock ETF has slightly higher average market caps.
Growth vs. Value:
- iShares Russell 3000 Growth ETF (NYSEArca: IWZ), annual fees: 0.25%; IWZ holds 1,800 stocks from the Russell 3000 that have higher projected growth and higher price-to-book ratios.
- iShares Russell 3000 Value ETF (NYSEArca: IWW), annual fees: 0.25%; IWW holds everything that IWZ does not.
“Balanced”:
- PowerShares Autonomic Balanced NFA Global Asset Portfolio ETF (AMEX: PCA), annual fees: 0.25%; PCA holds PowerShareses, iShares and Vanguard ETFs in a portfolio of 60% stocks and 40% bonds, with a majority of US-based assets.
- Claymore U.S.-1-The Capital Markets ETF (AMEX: UEM), annual fees: 0.55%; UEM is exposed to 2,000 US stocks and fixed income of every type.
Max Chen contributed to this article.