Is Vanguard Total Stock Market ETF a Millionaire Maker?

An Index ETF could certainly be a millionaire maker, but which one? Let’s dive into one stellar option.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published September 25, 2024 8:30 pm EDT

I know, it might not seem like an index could possibly be a millionaire maker. But I’m here to tell you there are some index exchange-traded funds (ETF) that certainly offer the opportunity. They offer a simple and effective way to invest in the stock market. All while minimizing risk and maximizing potential returns over the long term.

By tracking a specific index, these ETFs give investors exposure to a broad range of companies, thereby allowing them to benefit from the overall growth of the market rather than relying on the performance of individual stocks. Plus, with the power of compounding returns, regular contributions to an index ETF can lead to substantial wealth accumulation over time. So let’s look at the best possible option to get you there.

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The whole market

A total stock market ETF is an excellent option for investors looking to gain broad exposure to the entire stock market in a single investment. These ETFs track indexes that include large, mid, and small-cap stocks, providing a comprehensive snapshot of the market. If one sector stumbles, others can still thrive, making it a more balanced approach compared to picking individual stocks. Plus, with historically strong returns, a total stock market ETF is a solid way to participate in the growth of the economy over time.

Another great perk of a total stock market ETF is the simplicity it offers to investors. Instead of researching and managing multiple stocks, you can invest in one fund that automatically adjusts its holdings as the market changes. This low-maintenance approach is perfect for busy individuals or those new to investing. Additionally, many of these ETFs come with low expense ratios, meaning more of your money goes toward your investment rather than fees. With the power of compounding returns and the ability to invest consistently, a total stock market ETF could be a fantastic cornerstone for a long-term investment strategy.

VTI

The Vanguard Total Stock Market Index Fund ETF (NYSEMKT:VTI) is a popular choice for investors looking to tap into the entire U.S. stock market with a single, convenient investment. This ETF covers a wide array of stocks, from large-cap giants to small-cap companies that might just be getting started. With VTI, you get exposure to over 3,500 stocks, providing instant diversification that helps spread risk.

One of the best features of VTI is its low expense ratio, typically around 0.03%. This means more of your money stays invested and working for you over time. Vanguard is known for its commitment to keeping costs down, and VTI is no exception. Plus, this ETF offers a great way to take advantage of compounding returns, especially if you reinvest dividends.

The fundamentals

VTI is making waves with its impressive performance and robust portfolio. As of the writing of this article, its close at $278 shows a strong year-to-date return of 17.7%. With a low expense ratio of just 0.03%, it provides investors with a cost-effective way to gain exposure to the entire U.S. stock market. The ETF primarily focuses on equities, making up 99.6% of its holdings. And it features a diverse range of sectors, with technology leading at 30.4%. The top holdings include household names, which together comprise nearly 30% of the fund’s total assets.

VTI’s 52-week range highlights its resilience, fluctuating between $202.44 and $279.78, while the current price-to-earnings (P/E) ratio stands at 26.3. Despite a modest yield of 1.3%, its solid historical performance makes it a compelling choice for both long-term growth and stability. Currently averaging a 12.3% annual total return over the last decade, the fund’s net assets have reached an impressive $1.7 trillion, reflecting strong investor confidence. Overall, VTI is well-positioned for those looking to invest in a comprehensive slice of the U.S. market with potential for significant long-term gains.

Bottom line

VTI is a powerhouse option for investors seeking broad exposure to the U.S. stock market. The ETF has demonstrated impressive historical performance, averaging a 12.3% annual total return over the last decade. While its substantial net assets of $1.7 trillion reflect strong investor confidence. Even with a modest yield of 1.3%, VTI remains an attractive choice. Especially for those looking to capture the long-term growth potential of the U.S. market.