What VTI actually is
VTI is Vanguard’s ETF that tracks the CRSP US Total Market Index, which covers essentially the entire investable US stock market. Where an S&P 500 fund holds around 500 large companies, VTI also holds thousands of mid-sized and small ones.
It launched in 2001 and is one of the biggest ETFs in the world.
What is inside
Because the index is weighted by company size, the largest names still make up most of the fund. The big technology and financial companies sit at the top, just as in an S&P 500 fund. The difference is the long tail of smaller companies, which adds diversification and exposure to firms that may grow into tomorrow’s large caps.
In practice, VTI and an S&P 500 ETF move very closely together, because large companies dominate both.
Costs and distributions
Broad index funds like this are generally cheaper than actively managed ones, but check the current expense ratio on Vanguard’s website. VTI pays dividends quarterly, and the yield is modest, typically similar to or slightly above that of an S&P 500 fund. As in other broad index funds, the payout comes from the many companies in the portfolio, so it tends to be stable even when individual companies cut theirs.
What to keep in mind
- Market risk. A broad fund is diversified across companies, but it will still decline in a bear market.
- No international exposure. It covers only the United States.
- Small differences from the S&P 500. Don’t expect dramatically different results.
Quick take
VTI is a one-fund solution for US stock exposure. It is popular as the core of simple, long-term portfolios and pairs well with an international fund and a bond fund.