Vanguard Total Stock Market ETF 'VTI" - Time To Invest? | ETF Trends

The Vanguard Total Stock Market ETF (VTI) has been in existence since 2001 and is a passively managed index fund that is intended to replicate the performance of the overall U.S. stock market.

More specifically, it tracks the CRSP U.S. Total Market Index, which is composed of an assortment of more than 3,500 stocks of companies with a variety of sizes and investment characteristics. The ETF portfolio has a total of $672 billion of investor assets, making it an extremely popular and widely held index fund product.

Much of the fund’s popularity is due to the fact that it is passively managed, and that it is a market-cap weighted index fund, meaning that larger companies make up a more significant proportion of the ETF’s investments. What this signifies is that while the ETF owns stocks of companies of all different sizes, the heft of the portfolio is due to large-cap stocks. Top holdings include companies like Microsoft, AppleAmazonAlphabet, and Berkshire Hathaway, among others.

Passive management makes the fund especially popular since it keeps expenses low, one of the hallmarks of Vanguard funds. The ETF has a rock-bottom 0.04% expense ratio. As each fund passes its fiscal year-end, the annual expense ratio is calculated by dividing the fund’s operational expenses by its average net assets. If the fund’s assets are increasing faster than its costs, investors will enjoy lower expenses as a fund shareholder.

According to Vanguard, ” An expense ratio reflects how much a mutual fund or an ETF (exchange-traded fund) pays for portfolio management, administration, marketing, and distribution, among other expenses. You’ll almost always see it expressed as a percentage of the fund’s average net assets (instead of a flat dollar amount). For example, the average expense ratio across the entire fund industry (excluding Vanguard) was 0.58% in 2018, which equates to $58 for every $10,000 invested. Compare that with Vanguard, where the average for all of our mutual funds and ETFs was 0.10%, or just $10—that’s 83% lower!”

What this means for the average investor is that for every $10,000 that you have invested in the fund, you’ll only pay $4 toward management and administrative expenses every year. The overall stock market has historically generated annualized 9% to 10% returns over the long term, so with the Vanguard Total Stock Market ETF, you’ll will keep retain most of those gains.

Finally, one last enticement the Vanguard Total Stock Market ETF offers is dividends. The ETF passes the dividends paid by its holdings to shareholders in quarterly installments. As of this writing (May. 21, 2019), the Vanguard Total Stock Market ETF pays a 2.13% dividend yield to shareholders. Keep in mind though, that this rate can and will fluctuate over time based on the fund’s share price as well as the dividend behavior of the underlying stock portfolio.

RWCD: An ETF for Continued Upside in U.S. Cyclical Sectors

After stumbling out of the 2018, investors are seeing better results for U.S. equities in 2019, which could lead to a less defensive posture than originally anticipated. As such, investors looking for continued upside in U.S. cyclical sectors over defensive sectors, the Direxion MSCI Cyclicals Over Defensives ETF (NYSEArca: RWCD) offers them the ability to benefit not only from cyclical sectors potentially performing well, but from their outperformance compared to defensive sectors.

RWCD seeks investment results that track the MSCI USA Cyclical Sectors – USA Defensive Sectors 150/50 Return Spread Index.

At a 0.45 percent expense ratio, RWCD seeks to accomplish the following:

  • The Index measures the performance of a portfolio that has 150% long exposure to the MSCI USA Cyclical Sectors Index (the “Long Component”) and 50% short exposure to the MSCI USA Defensive Sectors Index (the “Short Component”).
  • On a monthly basis, the Index will rebalance such that the weight of the Long Component is equal to 150% and the weight of the Short Component is equal to 50% of the Index value.
  • In tracking the Index, the Fund seeks to provide a vehicle for investors looking to efficiently express a cyclicals over defensives investment view by overweighting exposure to the Long Component and shorting exposure to the Short Component.

If a risk-on sentiment continues to permeate the capital markets via stronger economic data, this could set the state for cyclical strength.

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