A one-stop U.S. equity holding

Gold-rated Vanguard U.S. Total Market Index covers the entire U.S. stock market for a paltry 0.16% expense ratio.

Jeffrey Bunce, CFA 7 February, 2017 | 6:00PM

 Vanguard U.S. Total Market Index ETF (VUN) is the quintessential core U.S. stock holding, providing investors with an excellent choice for passive exposure to a broad portfolio of U.S. stocks at a low cost. As such, VUN warrants a Morningstar Analyst Rating of Gold.

VUN proves that sometimes "more is more." Unlike an S&P 500 fund or the typical U.S. equity mutual fund, this ETF has a stake in small- and micro-cap stocks. This may result in some added volatility when smaller stocks lag, but investors have been rewarded for accepting this additional risk over the long term. For instance, during the 10 years ended December 2016, VTI has returned 8.7% (in Canadian dollars), beating the S&P 500 by 0.3 percentage points a year. This performance is also good enough to outpace approximately 90% of the fee-based U.S. equity mutual funds in Canada. VTI accomplished this favourable return with only a slightly higher standard deviation (15.8%) than the S&P 500 (15.3%). While smaller stocks will not always outperform, the fund's broad diversification should serve investors well regardless.

This ETF invests in U.S.-domiciled  Vanguard Total Stock Market (VTI), an ETF that tracks the CRSP U.S. Total Market Index, which holds almost every liquid U.S. stock. It includes all stocks with a primary listing on a major U.S. stock exchange, incorporated or with a major business presence in the United States, with a market cap of at least $10 million, with at least 10% of shares publicly available, and that meet minimum trading requirements. This results in an average market cap for stocks in the index that is about half the typical fund in the U.S. equity category.

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About Author

Jeffrey Bunce, CFA

Jeffrey Bunce, CFA  Jeffrey Bunce, CFA, is a senior investment analyst for Morningstar’s Investment Management group.

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