Some investors put a great deal of energy into finding ways to goose their returns, from investing in individual stocks to allocating cash to exotic exchange-traded funds (ETFs). For most of us, however, the simplest solutions are also the best.
That’s where the Vanguard Total World Stock ETF (VT) comes in to play. This global stock fund uses an all-in-one approach to investing in the world equity markets, covering the United States, developed foreign markets, and emerging markets within one portfolio, allocating a proportional representation to each.
This eliminates the need for investors to determine the appropriate allocation among these three areas, to rebalance the allocation as market conditions change, and to find individual funds that represent all three.
Keep in mind, geographic diversification is important in the realm of stock investing. While the global economy is increasingly interconnected, different areas of the world continue to experience divergent economic and market conditions. From 2004 through 2008, for instance, the emerging markets vastly outperformed the U.S. stock market. In 2012-2013, however, that relationship did a 180-degree turn. By holding a single investment that owns both asset classes, investors could have smoothed out the impact of these shifts – and seen less volatility from their portfolio than they would have by holding either individually.
The Vanguard Total World Stock ETF also devotes a proportional allocation to large-, mid-, and small-cap stocks, which again takes guesswork out of the equation and simply assigns weightings to each based on their representation in the overall market.
The VT ETF also offers extensive sector diversification, which means that investors won’t accidentally make a heavy “bet” on one or two areas of the market. This broad level of exposure is essential for a core holding.
The Vanguard Total World Stock ETF also has two other key attributes to its credit. First, its expense ratio is only 0.18%, meaning that investors have to give up only a small fraction of their return potential in fees. Second, it offers a hearty dividend yield. As of April 2014, VT yielded about 2.2%. While this won’t make anyone rich, this represents higher income than that offered by a wide swath of bond funds.
This fund isn’t exciting, and that’s just the point. In contrast to actively managed funds, where a manager’s stock picks can lead to wide performance swings around an index, the VT ETF simply tracks the performance of the global equity markets – making it a one-decision investment for beginning to moderately experienced investors. The fund’s home page can be found here.
In terms of performance, the Vanguard Total World Stock ETF’s returns stacked up as follows as of April 23, 2014. Keep in mind that the global equity markets have performed very well in recent years, so future returns may be quite different than those shown here. The three-, five-, and ten-year numbers are average annual total returns.
Why discuss a stock fund on a website devoted to bonds? Very simply, there are very few investors who have 100% of their assets devoted to fixed income. Even conservative, income-oriented investors often have an allocation to equities in order to provide some growth potential and help offset the long-term impact of inflation. For a discussion of the way to determine what asset allocation may be right for you, see my article, “How Much Should You Invest in Stocks, Bonds, and Cash?"
Disclaimer: The information on this site is provided for discussion purposes only, and should not be construed as investment advice. Under no circumstances does this information represent a recommendation to buy or sell securities. Always consult an investment advisor and tax professional before you invest.
That’s where the Vanguard Total World Stock ETF (VT) comes in to play. This global stock fund uses an all-in-one approach to investing in the world equity markets, covering the United States, developed foreign markets, and emerging markets within one portfolio, allocating a proportional representation to each.
This eliminates the need for investors to determine the appropriate allocation among these three areas, to rebalance the allocation as market conditions change, and to find individual funds that represent all three.
Keep in mind, geographic diversification is important in the realm of stock investing. While the global economy is increasingly interconnected, different areas of the world continue to experience divergent economic and market conditions. From 2004 through 2008, for instance, the emerging markets vastly outperformed the U.S. stock market. In 2012-2013, however, that relationship did a 180-degree turn. By holding a single investment that owns both asset classes, investors could have smoothed out the impact of these shifts – and seen less volatility from their portfolio than they would have by holding either individually.
The Vanguard Total World Stock ETF also devotes a proportional allocation to large-, mid-, and small-cap stocks, which again takes guesswork out of the equation and simply assigns weightings to each based on their representation in the overall market.
The VT ETF also offers extensive sector diversification, which means that investors won’t accidentally make a heavy “bet” on one or two areas of the market. This broad level of exposure is essential for a core holding.
The Vanguard Total World Stock ETF also has two other key attributes to its credit. First, its expense ratio is only 0.18%, meaning that investors have to give up only a small fraction of their return potential in fees. Second, it offers a hearty dividend yield. As of April 2014, VT yielded about 2.2%. While this won’t make anyone rich, this represents higher income than that offered by a wide swath of bond funds.
This fund isn’t exciting, and that’s just the point. In contrast to actively managed funds, where a manager’s stock picks can lead to wide performance swings around an index, the VT ETF simply tracks the performance of the global equity markets – making it a one-decision investment for beginning to moderately experienced investors. The fund’s home page can be found here.
In terms of performance, the Vanguard Total World Stock ETF’s returns stacked up as follows as of April 23, 2014. Keep in mind that the global equity markets have performed very well in recent years, so future returns may be quite different than those shown here. The three-, five-, and ten-year numbers are average annual total returns.
| 1-Year | 3-Year | 5-Year | Since Inception (6/24/08) |
| 17.1% | 8.3% | 16.7% | 5.4% |
Why discuss a stock fund on a website devoted to bonds? Very simply, there are very few investors who have 100% of their assets devoted to fixed income. Even conservative, income-oriented investors often have an allocation to equities in order to provide some growth potential and help offset the long-term impact of inflation. For a discussion of the way to determine what asset allocation may be right for you, see my article, “How Much Should You Invest in Stocks, Bonds, and Cash?"
Disclaimer: The information on this site is provided for discussion purposes only, and should not be construed as investment advice. Under no circumstances does this information represent a recommendation to buy or sell securities. Always consult an investment advisor and tax professional before you invest.
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