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Total Stock ETFs: A One-Stop Investment for Portfolio Diversification


Instead of meticulously browsing through thousands of stocks to craft an equity portfolio, investors can utilize a single broad market exchange traded fund to garner a diversified investment.

For instance, broad Vanguard stock ETFs, like the Vanguard Total Stock Market ETF (VTI) , allows investors to follow thousands of U.S. stocks through a single investment. VTI tracks 3,684 stocks at a low 0.05% expense ratio. [Craft An Investment Portfolio Using 5 ETFs]

The “low expense ratios, exposure to virtually all publicly traded U.S. stocks, and well-regarded parent company make them the default choice for many investors,” writes Adam Zoll for Morningstar.

Other broad ETFs that try to provide total U.S. stock exposure include the iShares Russell 3000 ETF (IWV) , which has 2,979 holdings and a 0.20% expense ratio; Schwab U.S. Broad Market ETF (SCHB) , which has 2,007 holdings and a 0.04% expense ratio; and iShares Core S&P Total US Stock Market ETF (ITOT) , which has 1,501 holdings and a 0.07% expense ratio.

However, potential investors should try sticking to one total market ETF. While the different ETFs may follow varying indexing methodologies, many of the underlying holdings will overlap.

Additionally, these traditional beta-indexing ETFs are also slightly top heavy since they follow market capitalization-weighted indices. For example, the total market ETFs includes about 70% of their portfolio in mega- and large-cap companies.

“The main takeaway is that a total stock market ETF or mutual fund such as VTI is dirt-cheap and a great way for many investors to gain broad market exposure in an easy-to-own package,” Zoll said. “But if you want a little more control over your portfolio, you’ll probably have to pay a little more and spend a little more time managing your portfolio by owning multiple ETFs or mutual funds.”

Vanguard Total Stock Market ETF


For more information on ETFs, visit our ETF 101 category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.