The primary reason to own any exchange traded fund (ETF) is low-cost diversification. Most ETFs have essentially replaced the function of mutual funds (and some even offer active management), allowing passive investors unwilling to spend a lot of time of energy on portfolio allocation and rebalancing with a very economical and powerful tool in this endeavor.
In this article, I’m going to discuss one ETF wit perhaps the greatest amount of diversification an investor could ever achieve with a rock bottom management expense ratio (MER) of only 0.3%.
The Vanguard Total Stock Market ETF (NYSE:VTI) owns pretty much everything worth owning. The fund holds around 3,300 stocks in the small-to-large-cap-size range, providing a level of diversification that is almost unheard of, or certainly would have been unheard of decades ago, particularly with an MER of 0.3%, a fraction of what is charged by most mutual funds.
This level of diversification essentially provides an investor with one simple investment vehicle to put all of one’s eggs into, simplifying the investing process and greatly cutting down on trading fees.
This ETF interestingly is highly correlated to the movements of SPDR S&P 500 (TSX:SPY), the ETF that tracks the S&P 500, however the VTI ETF does have greater exposure to small caps, increasing the level of leverage on has to small to medium sized enterprises (SMEs). This factor is beneficial for those bullish on a recovery from the economic woes created by the coronavirus pandemic.
Invest wisely, my friends.
