1 Low-Cost ETF to Buy That Helps You Sleep Easy at Night
March 28, 2023
For expert investors and beginners alike, there’s always a place for exchange-traded funds (ETFs) in a portfolio.
If you’re not familiar, exchange-traded funds (ETFs) basically you give instant diversification by allowing you to purchase a tiny slice of hundreds of companies in one go.
ETFs also trade on a stock exchange, like the Singapore Exchange (SGX) or New York Stock Exchange (NYSE).
Over the past few decades, they have exploded in popularity. And for good reason – they offer investors of all stripes diversification at an extremely low cost.
So, in this febrile market environment, it’s a good time to revisit the virtues of ETFs and how regularly contributing to buying one can help us build wealth over the long term.
By utilising the dollar-cost average (DCA) method, investors can continue to invest without worrying about timing the market.
With all the uncertainty out there, here’s one super diversified ETF that any investor can buy and hold – allowing you to sleep easy at night no matter what’s happening in markets.
Investing in the long-term success of the US stock market
Vanguard is a massive provider of ETFs and its Vanguard Total Stock Market ETF (NYSE: VTI) provides the perfect diversifier and wealth creator for investors.
Of course, you’re going to have to be focused on investing for the long term while ignoring the short-term noise from the likes of Credit Suisse or Silicon Valley Bank.
That’s because you would be investing in the long-term success of the US stock market. If we look back at history, that tends to work out well for investors (see below).
Source: Credit Suisse Global Investment Returns Yearbook, 2020
Of all countries globally, only the Australian stock market has delivered a better real annualised average return than the US from 1900-2019 – a 120-year period.
Benefitting from being the world’s largest stock market – by some stretch – also helps the US.
Cheap as chips and less tech-heavy
As for the Vanguard Total Stock Market ETF, its expense ratio of 0.03% is on par with or cheaper than the costs of the widely popular S&P 500 ETFs.
These include the likes of the SPDR S&P 500 ETF (NYSE: SPY), Vanguard S&P 500 ETF (NYSE: VOO), and iShares Core S&P 500 ETF (NYSE: IVV).
So, what’s the difference, you ask? Well, the main differentiator is that the Total Stock Market ETF has 3,945 stocks – giving you exposure to the whole US stock market.
That compares to the 500 or so stocks that the large S&P 500 ETFs give you exposure too.
As a result, the Total Stock Market ETF has a lower weighting in technology shares.
For example, in terms of the top 10 holdings – seven of which are in tech – the Total Stock Market ETF has around 3-4 percentage points less exposure to them than the typical S&P 500 ETF.
So, you’ve still got a decent exposure to the technology sector but if tech doesn’t outperform the way it has over from 2009-2021, then you’ll be less exposed than a typical S&P 500 ETF.
Focusing on long-term goals
Overall, when it comes to investing for the long term and consistently, ETFs fit the bill perfectly.
That’s because investors can choose to DCA into them on a regular basis without having to worry about the individual situations of specific companies.
By taking the timing aspect out of the equation, along with any systemic worries over companies, investors can instantly be diversified while still having exposure to the world’s largest stock market.
With an expense ratio of 0.03% and exposure to over 3,945 stocks in the US, the Vanguard Total Stock Market ETF is certainly one ETF that investors can buy and hold with peace of mind.
Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips owns shares of Vanguard Total Stock Market ETF.
Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.
He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.
In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.