The Vanguard Total Stock Market ETF (NYSEArca: VTI) recently became the third US-listed exchange traded fund to reach $100 billion in assets under management. The other two are S&P 500 tracking ETFs, but for some investors VTI and other total market funds could be better alternatives to the S&P 500.
A year ago, VTI had about $82 billion in assets under management. VTI tracks the CRSP U.S. Total Market Index, which includes almost every liquid U.S. stock on the market. VTI offers a notable alternative to standard S&P 500 index funds at a time when equities are perking up.
“The total stock market fund covers large-cap, mid-cap and small-cap stocks, while the S&P 500 covers only the large-cap universe,” reports CNBC. “The popularity of the total stock market approach also is taking place within Vanguard’s ETF lineup. Vanguard’s Total Stock Market ETF (VTI) recently became only the third ETF to pass the $100 billion mark in assets.”
Although VTI holds 3,654 stocks, far more than reside in the S&P 500, the ETF’s returns are often on par with the S&P 500. Over the past three years, VTI is up 56.4%, just slightly behind the 57.1% returned by the S&P 500. VTI and the S&P 500 have been similarly volatile over that period.
“The performance differential between the two is often minimal, because total stock market ETFs are typically market-cap weighted — even though they hold small- and mid-cap equity, large-cap holdings still make up the bulk of these funds,” according to CNBC.
Really Cheap
In addition to its expansive roster, another reason investors love VTI is its low fee. VTI’s annual fee is just 0.04% per year, or $4 on a $10,000 investment. Only a handful of ETFs in the U.S. have lower fees and VTI is cheaper than 96% of rival funds.
“The benefit of questioning the S&P 500’s ubiquity in portfolios is, ultimately, to reinforce the importance of core, long-term investing anchors at a time when there are thousands of ETFs,” reports CNBC.
The next ETF to hit $100 billion in assets is likely to be the Vanguard S&P 500 ETF (NYSEArca: VOO), which now has over $97 billion in assets. VOO is one of this year’s top asset-gathering ETFs.
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