Skip to main content

Vanguard's VT ETF

I get asked what the best way is to get started with stock investing and my answer is always Vanguard. They are the firm that revolutionized low cost index fund investing. The founder, Jack Bogle, saw an opportunity where a majority of active mutual fund companies could not beat the underlying stock index, plus they were charging high fees, plus they were not as diversified as the index itself. So Jack set out to create a company where the funds he created tracked the underlying indexes by mimicking their holdings. This diversified the fund and allowed him to reduce the costs to manage the fund since the holdings were based on an easy-to-follow formula of matching the index. No need to pay for people who thought they could beat the index.

What I love about recommending Vanguard is they have the very best exchange traded fund (ETF) in my opinion. It trades under the stock symbol "VT" and tracks the global stock market. 

I call VT the "no-regrets" fund because it literally has everything in it. Most people, including investment professionals, cannot beat the index, and VT literally tracks every stock index across the entire world. So you effectively own of piece of every publicly traded company. As of 6/30/2020, the fund comprised 8,696 stocks. So by buying one share of VT, you are literally buying ownership in 8,696 global companies. How cool is that!

Wish you bought Apple or Amazon in the early 2000s? Holding this fund you would have. Want to ride the growth of emerging markets? This fund has the stocks of all the emerging markets. Think REITs or gold mining stocks should be part of your portfolio? This has those. What about small-cap stocks that perhaps can grow faster? This has those too. 

All you have to do is keep trickling a portion of your savings into VT and watch the magic of compounding happen. Of course, if someone had a crystal ball, they could beat the performance of VT by allocating across the globe in the areas that grow faster than other areas. Had you guessed that the U.S. stock market would perform better over the last 10 years or that global technology would be so strong, you could have beat VT. But on the other hand, by continuing to trickle money into VT, you are now buying the other parts of the world and other industries like energy at a discount, and they may end up being the places to be for the next 10 years. 

This is why it's the no regrets investment. You literally own everything so you can just set it and and forget it. This fund mimics the public markets across the entire world, so as of 6/30/20 it was allocated 60% to North American stocks (including the U.S.) since that is how much value those stocks had in relation to the entire global basket of stocks. It had 17% in Europe, 11% in Emerging Markets, and 12% in Asia. The top holding were in the exact proportion of the world's top publicly traded companies. And as this shifts over time, so will VT.

7 of the 10 were U.S. companies (Apple, Amazon, Microsoft, Alphabet, Facebook, J&J, and Berkshire Hathaway), but there were also 3 non-U.S. stocks since these companies are now becoming valued in the same league as the U.S. companies. Those were Alibaba, Tencent, and Taiwan Semiconductor. These 10 companies comprised 14.5% of the holdings of VT which is the same relationship that their value has compared to all other global publicly traded companies.

The fund's expense ratio is only 0.08%. That means if you own $1,000 worth of VT, your annual expenses are only $0.80. This is incredibly cheap and why Vanguard is my good-to fund provider. The fund started on 6/24/2008 so is now 12 years old. That date happens to correspond with a time that the global markets were elevated right before the great financial crisis of 2008/2009. Even still the fund has generated a return of 5.8% since that time. Over the last 10 years which means you were starting at a relatively low point coming out of the great financial crisis, the fund has returned a solid 9.41%.

To learn more about Vanguard and the VT ETF, visit this website