After an extended weekend on account of the Presidents Day holiday yesterday, bears are back to bite as a hotter-than-expected CPI of 0.5% for January has renewed anxiety regarding protracted hawkishness by the Federal Reserve.
The volatile market environment is not too divergent from the turbulent geopolitical and macroeconomic environment, and businesses are grappling with it amid the ever-present double-edged sword of technological disruption hanging over their heads.
With market volatility expected to continue in the foreseeable future and landslides in the global economic landscape set to keep increasing in frequency and impact over the long run, it is extremely difficult, if not impossible, to bet on any specific business or sector for the long run.
However, Vanguard Total Stock Market ETF (VTI) comes to the rescue by providing cost-effective diversification to protect investors from the risk of ignorance. The Vanguard Group, Inc manages the exchange-traded fund. The fund invests in all securities across the entire market-cap spectrum to give investors broad exposure to the U.S. equity market.
VTI has gained 2.5% over the past month to close the last trading session at $205.08. The fund’s NAV was $205.10 as of February 17, 2023.
Size and Diversification
With around $287.34 billion in AUM, VTI passively tracks a market cap-weighted index that measures the investable U.S. equities market. Among 3925 holdings, its top holding is Apple Inc. (AAPL), which has a 5.37% weighting in the fund, followed by Microsoft Corporation (MSFT) at 4.55%, and Amazon.com, Inc. (AMZN) at 2.2%.
Negligible Fees and High Yields
With an expense ratio of 0.03%, VTI is one of the cheapest funds available. Moreover, the ability to trade commission-free within a Vanguard account makes it more appealing to investors who wish to maximize returns by saving the most on commissions.
VTI yields a 1.19% annual dividend at the current price, higher than its category average of 0.95%.
Popularity with Consistency
The fund flows came in at $2.02 billion over the past month and $5.01 billion over the past three months.
The fund’s volatility is comparable to the total stock market it tracks. This is reflected in its beta of 1.03.
POWR Ratings Reflect Robustness
VTI has an overall B rating, which equates to a Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
VTI has an A grade for Trade and a B for Buy and Hold, consistent with its recent price performance and the relatively safe margin between its current price and its 52-week high price of $233.36.
VTI is ranked #105 of 274 stocks in the B-rated Large Cap Blend ETFs category.
Beyond what has been discussed above, additional ratings for VTI can be found here.
Bottom Line
John C. “Jack” Bogle, the founder of The Vanguard Group, wrote in his book, The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns, “Don't look for the needle in the haystack. Just buy the haystack!.”
VTI’s broad base of holdings and market-cap weighted, sector-agnostic exposure promises a simple path to wealth without the risk of missing the forest for the trees.
Hence Vanguard Total Stock Market ETF (VTI) deserves to be a core holding of a long-term portfolio.
How does Vanguard Total Stock Market ETF (VTI) Stack up Against Its Peers?
VTI has an overall POWR Rating of B, which equates to a Buy. Investors could also consider looking at its peers in the Large Cap Blend ETFs category, Vanguard Dividend Appreciation ETF (VIG), Invesco S&P 500 Equal Weight ETF (RSP), and iShares Core Dividend Growth ETF (DGRO) with an A (Strong Buy) rating.
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VTI shares were trading at $201.14 per share on Tuesday afternoon, down $3.94 (-1.92%). Year-to-date, VTI has gained 5.20%, versus a 4.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.
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