Is VT a Good ETF? | The Complete Overview of VT
The Vanguard Total World Stock ETF (VT) seeks to track the returns of the FTSE Global All-Cap Index. The fund invests in domestic and foreign equities, including emerging and well-established markets.
Investors may use this ETF as a one-stop shop for a diversified equity portfolio or as part of a diversified multi-ETF portfolio. Currently, over 60% of the fund is allocated to U.S. equity, but unlike indexes like the S&P 500, the fund can invest in any company in the world.
The fund gives you similar exposure to indices like the S&P 500 but has more flexibility to invest in a wider arrange of equities. If the market regime changes and international equities become more prevalent, this ETF will likely outperform the domestic ETFs.
VT Overview
Dividend yield: 2.30%
Expense ratio: 0.07%
10 year total return: 33.97%
30 year average annual return: 6.41% per year
VT is a well-diversified ETF with an expense ratio of 0.07%, which is a good value. A low expense ratio is no surprise regarding Vanguard funds as they provide the lowest-cost ETFs out of most funds.
VT’s dividend yield is also good at 2.30%, considering the diversification you receive. However, the funds 10y year return significantly lags compared to strictly domestic funds since American equities have performed extraordinarily ever since the 2008 crisis.
Pros and Cons of VT
Before investing in VT, consider these pros and cons of the ETF to make your decision easier.
Pros:
Maximum diversity
The primary benefit of the VT ETF is that it is highly diversified. It is an excellent ETF for investors looking for a one-stop shop for complete diversity in international, domestic, emerging, and non-emerging markets.
Reasonable expense ratio
The expense ratio is another bonus of this ETF since it is much lower than most funds. It is an excellent way to gain exposure to various sectors and countries, all with low fees.
Cons:
Low historical performance
Over the last ten years, VT only provided its investors with a total return of just over 30%. On the other hand, the S&P 500 funds are up over 60%, twice the return of the Vanguard Total World Stock ETF.
Over diversification
While many investors may enjoy the diversification of this ETF, some will consider it overly diversified. There is much less risk for one company to ruin your investment. However, you will not incur significant returns with highly diverse funds.
VT Historical Performance
Over the last ten years, VT has provided investors an average annual return of around 8.25%. 8.25% is a reasonable yearly return since the S&P 500 has returned an annual return of 12.74%.
Even though VT is currently underperforming domestic U.S. equities, the past does not always indicate future performance. International equities may outperform domestic equities as market regimes change.
VT’s Top 10 Holdings
1- Apple
Weight in fund: 3.76%
Like many ETFs, Apple is the top allocation since it is the largest company by market cap in the world.
2- Microsoft
Weight in fund: 2.78%
Microsoft is the next largest allocation since it is a large and well-diversified company.
3- Amazon
Weight in fund: 1.46%
Amazon is the largest eCommerce company in the world and generates reliable revenue from its eCommerce and Amazon Web Services.
4- Tesla
Weight in fund: 0.93%
Tesla went from a massively unprofitable organization to one of the largest companies in the world in a short period, and many funds adopted it, giving it the number four spot in VT.
5- Google Class A
Weight in fund: 0.92%
Google generates substantial revenue from ads and YouTube and has a large market cap, giving it the number five spot in the VT fund.
6- UnitedHealth Group
Weight in fund: 0.83%
UnitedHealth falls to number six in the allocations, as it is one of the largest healthcare companies, which is a reliable industry to invest in.
7- Google Class C
% of fund - 0.81
Google falls twice on the list since the fund invests in class A and class C shares, making the company’s total allocation about 1.73%.
8- Exxon Mobil
Weight in fund: 0.74%
Exxon Mobil is a reliable oil company and gives VT exposure to the energy industry since it falls to number eight on the list of allocations.
9- Johnson & Johnson
Weight in fund: 0.73%
Johnson & Johnson is the ninth largest allocation, giving VT exposure to the pharmaceutical industry.
10- Berkshire Hathaway Class B
Weight in fund: 0.70%
Finally, Berkshire comes in at number ten because who doesn’t want exposure to one of the most famous investors of all time, Warren Buffett?
Is VT a Good ETF? | Final Thoughts
Overall, VT is an excellent ETF for investors seeking exposure to a wide range of equities. In addition, it is one of the best one-stop shop ETFs for investors who prefer a highly diversified approach.
VT contains all types of equities from various countries, but the top ten holdings are currently all U.S. equities. Unlike a domestic ETF, the fund can easily rebalance its holdings to include practically any company in the world.
Therefore, if the U.S. markets become less powerful, VT can allocate to the better country in power. VT’s top holdings are strikingly identical to domestic ETFs, but the added ability for the managers to buy international equity is a unique benefit.
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As Always: Buy things that pay you to own them.
-Josh
Blog Post: #076
