Vanguard US Total Market Shares Index ETF (ASX: VTS) is an exchange-traded fund (ETF) that could be one of the best long-term options for investors seeking overseas exposure. The VTS ETF is about giving Aussies exposure to the large US share market. Compared to iShares S&P 500 ETF (ASX: IVV), the VTS ETF has much broader diversification.
What does the Vanguard US Total Market Shares Index ETF do?
The S&P 500 fund, IVV, obviously gives exposure to 500 businesses. But, the VTS ETF actually has more than 3,600 holdings. It provides low-cost access to some of the largest companies in the world, as well as many of the smaller US businesses.
I’m sure you’ve heard of some, if not all, of the biggest 10 holdings in the portfolio. Those names are: Apple Inc (NASDAQ: APPL), Microsoft Corporation (NASDAQ: MSFT), Amazon.com Inc (NASDAQ: AMZN), Alphabet Inc (NASDAQ: GOOGL), Facebook Inc (NASDAQ: FB), Tesla Inc (NASDAQ: TSLA), JPMorgan Chase & Co (NYSE: JPM), Berkshire Hathaway Inc (NYSE: BRK), Johnson & Johnson (NYSE: JNJ) and Visa Inc (NYSE: V).
In my opinion, and many other investors’ opinions, the above names are some of the highest-quality businesses in the world in their respective industries.
Why is VTS ETF so good?
I think that the ETF offers almost everything you could want.
It has extremely low costs, which can be one of the main benefits of an ETF. It has annual management fees of just 0.03% per annum, which is one of the cheapest that Aussies can get.
Vanguard US Total Market Shares Index ETF has very good diversification. Not only does it have a large number of holdings, but they’re spread fairly evenly. The biggest exposure is just over a quarter is IT, which is good because that’s where there are high margins and growth. Then there’s consumer discretionary (16.5%), industrials (13.8%), health care (13.3%), financials (11.3%), consumer staples (4.8%), real estate (3.4%), telecommunications (3.2%), energy (2.8%), utilities (2.7%) and basic materials (2%).
VTS historical returns
Vanguard US Total Market Shares Index ETF has been a top-performing investment for a long time. Over the last decade it has produced an average of net return of 16.6% per year. Past performance is no guarantee of future performance, but it shows how well it can do over extended periods of time.
Any negatives?
For me, the fact that it has a very low dividend yield (of 1.4%) means you’ve got to think about this as just a capital growth idea. If you’re also looking for income then ASX dividend shares could be a way to build a hybrid portfolio of both growth and dividends.
