Could Vanguard US Total Market Shares Index ETF (ASX: VTS) be a really good investment for beginners to consider?
What’s an exchange traded fund (ETF)?
If you don’t know what an ETF is then it could be a smart idea to look at Rask’s free beginner ETF investor course.
An ETF basically lets you invest in a whole bunch of different businesses with a single investment. Very handy if you want to get good diversification, but you don’t want to buy 50, or 100 or 1,000 businesses yourself. In-fact, I’d say buying 1,000 different companies yourself would be a very poor choice for all the brokerage costs alone.
What’s Vanguard US Total Market Shares Index ETF?
This ETF is one of the biggest ones on the ASX, it’s just over $2 billion in size. It’s a popular option for Aussie investors.
The concept of this ETF is that it gives exposure to a large part of the US market, particularly some of the largest companies in the world which are listed in the US.
As you might expect from a US-focused ETF, the biggest sector allocation in the ETF is technology. But there are also sizeable weightings to companies in the sectors of consumer discretionary, industrials and health care.
What are the actual holdings?
In terms of the top 10 holdings, at the end of December 2020 those biggest positions were: Apple, Microsoft, Amazon, Alphabet, Facebook, Tesla, Berkshire Hathaway, Johnson & Johnson, JPMorgan Chase and Visa.
I’m sure you know of many other businesses in the portfolio such as Proctor & Gamble, Walt Disney, Mastercard, Nvidia, Home Depot, PayPal, Adobe, Netflix, Coca Cola, PepsiCo, Walmart and Intel. Almost every major, multi-national US company you could think of is probably in this ETF’s holdings.
This is one of the cheapest ETFs on the ASX, its management fee is just 0.03% per year. Which is essentially nothing. That’s really great for investors because almost all of the gross returns end up in investor pockets.
What about the returns?
The net returns have been really good in my opinion. Over the past three years, Vanguard US Total Market Shares Index ETF’s average return per year has been 15%. Over the past 10 years it has been an average of 17% per year.
This is a high-performing ETF because its larger holdings are just such good businesses. I think it could form a core part of a portfolio and it’s better than ASX-focused ETFs in my opinion. There are other ETFs that I like too such as Betashares Global Quality Leaders ETF (ASX: QLTY) that are high quality and give good diversification.
Not only is VTS a good idea, I suggest getting a free Rask account and accessing our full stock reports. Click this link to join for free and access our analyst reports.