The Ideal Long-Term Investment: A Broad Market ETF

The quintessential long-term investment strategy, for those who prefer a “set it and forget it” approach, involves broad market coverage and an ultra-low expense ratio.

The Concept of Low-Cost Diversification

The ETF marketplace truly excels in providing investors with a simple yet powerful means to create diversified portfolios. Whether your financial goal is retirement or saving for a home, an ETF exists that can serve your purpose splendidly. These funds offer financial manoeuvres at almost no cost, allowing you to maximize your returns.

The Magic of the Vanguard Total Stock Market ETF

In my opinion, one of the finest ETFs for a passive strategy is undoubtedly the Vanguard Total Stock Market ETF (VTI). This fund offers exposure to nearly the entire U.S. stock market by tracking the CRSP US Total Market Index. It encompasses roughly 3,500 stocks, ranging from large to micro-cap stocks. Its broad coverage enables it to thrive across various market environments while keeping expenses minimal.

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Coping with Market Fluctuations

Much of the ETF’s allure lies in its ability to weather diverse market conditions. Unlike the Vanguard S&P 500 ETF (VOO), which focuses on large caps, it captures an additional 25% of stocks that are not large caps. This diversity allows the ETF to zig when the S&P 500 zags.

Why Broaden Your Horizons?

Whilst the S&P 500 (^GSPC) is a prominent name, and its large caps have frequently bested smaller stocks, looking beyond can be beneficial. I personally advocate for a more comprehensive portfolio strategy. Small caps, as witnessed in the Russell 2000 index, have occasionally demonstrated their potential by outperforming the S&P 500, even in the past 30 years.

The Current Market Landscape

2026 is proving the efficacy of diversification. The Russell 2000 recently surpassed the S&P 500 for 14 consecutive trading days—a feat unseen for three decades. Moreover, value and dividend stocks are also outperforming this year. Such trends highlight the advantages of a diversified portfolio.

The Vanguard Advantage

Consequently, the Vanguard Total Stock Market ETF has begun to outperform in these initial stages of the year. Its sector allocations differ from the tech-heavy large-cap universe, opting for industrials, healthcare, and financials, with technology in fourth place.

Key Data Points

With its ultra-low expense ratio of just 0.03%, it’s an exceptionally cost-effective choice. As history indicates, a return to prominence for small caps and total market funds might just be on the horizon.

In conclusion, for those who aim to become a multimillionaire with minimal exertion, investing in the Vanguard Total Stock Market ETF could be a step in the right direction. It’s an investment you can tuck away and comfortably forget, while it works diligently on your behalf.