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ETF Specialist

This ETF and the S&P 500 Make a Good Pair

Consider this low-cost exchange-traded fund to round out a large-cap equity holding.

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 Vanguard Extended Market ETF (VXF) invests in nearly all U.S. stocks outside of the S&P 500. It efficiently tracks a well-diversified market-cap-weighted index at a low fee, which supports its Morningstar Analyst Rating of Gold.

The fund tracks the S&P Completion Index, which is designed to round out a large-cap equity holding, such as an index fund tracking the S&P 500. The fund primarily holds mid-, small-, and micro-cap stocks, but it also includes a handful of large-cap names. The fund lands in mid-blend territory, but it reaches further down the market-cap spectrum than most peers and straddles the mid- and small-cap size segment breakpoint. Indeed, small- and micro-cap stocks make up over 50% of its holdings by weight. Because the index relies on others to accurately price its holdings, the fund is fully exposed to the potential excesses of the market. But it also reflects the collective views of active investors.

Adam McCullough has a position in the following securities mentioned above: VTI. Find out about Morningstar’s editorial policies.