A Review of Total Stock Market ETFs

ETF Trends

Many of the broad based U.S. exchange traded funds give investors a low-cost one-shot investment that can double as a core equity holding. With funds such as the Vanguard Total Stock Market (VTI)  investors can buy the whole U.S. market in one purchase.

“Shattered by the financial crisis, investor confidence equities remains fragile. Consequently, investors demand a large margin of safety before being willing to leave bonds for stocks. At this point, stocks look fairly valued according to several different valuation methods. The S&P 500 in early 2012 is trading at the same level it hit in 1999. Yet the underlying companies have grown profits considerably over the trailing decade,” Michael Rawson wrote on Morningstar.[ETF Chart of the Day: US Total Stock Market]

A broad index that covers the total U.S. stock market is advantageous for investors because no matter what industry, size segment, or company does well over the next decade, investors are sure to own them in this [type of] fund, reports Rawson. [ETF Spotlight: VTI]

Broad-based U.S. ETFs also have the added benefit of risk mitigation. The sheer number of companies a broad-based fund owns gives investors some shelter from market volatility. Plus, the scope of industries and sectors that are covered gives funds of this type the ability to be a core holding in a well-diversified portfolio.

Here some ETFs that allow investors to buy the entire U.S. stock market with one purchase and low fees:

  • Vanguard Total Stock Market (VTI)  0.07%; Covers 99.5% of the total US equity market and has a free-float market cap weighted index. This is one of the lowest cost fund an investor can buy. About 6%-9% of assets are invested in small-caps for well-rounded exposure.
  • iShares Russell 3000 ETF (IWV)  0.20%; This fund invests in micro-caps and mega-caps and everything in between. It has a 99% correlation to the S&P  500 and is the only all-world ETF to invest heavily in micro-caps.
  • Schwab US Broad Market ETF (SCHB)  0.06% ;The fund tracks the most liquid stocks, with an index of 2,500 stocks. Micro-caps are the only asset class that is left out.
  • SPDR Dow Jones Total Market ETF (TMW)  0.20%; The index is comprised of market-cap weighted U.S. large caps. The index is reviewed monthly to avoid too much of a tilt toward any asset class.
  • iShares S&P 1500 Index Fund ETF (ISI)  0.20%; The index the fund tracks omits any small-caps and micro-caps. Like many of the broad-based funds, the ETF has a 99% correlation to the S&P 500. [Morningstar on How to Build a Core ETF Portfolio]
Tisha Guerrero contributed to this article. 

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