The Broadest Vanguard Stock Fund Available

Key Morningstar Metrics for Vanguard Total World Stock Index

• Morningstar Medalist Rating: Gold
• Process Pillar: High
• People Pillar: Above Average
• Parent Pillar: High

Vanguard Total World Stock Index VTWAX offers unrivaled diversification and should prove difficult to beat over the long run.

This fund tracks the FTSE Global All-Cap Index, which includes stocks of all sizes listed in developed and emerging markets. It weights them by market cap, an approach that benefits investors by capturing the market’s collective opinion of each stock’s value while keeping turnover low. Market-cap-weighting can be tough to beat because the market does a good job of valuing stocks over the long run. Occasionally, it will increase the fund’s exposure to expensive stocks when investors get excited about an area of the market. But this doesn’t undermine its long-term efficacy.

Broad diversification mitigates the impact of the worst performers on the fund’s overall performance. The index includes more than 9,000 stocks, and the managers almost fully replicate the benchmark. Its 10 largest names account for only 16% of its assets, making it one of the least concentrated portfolios in the global large-stock blend Morningstar Category. By comparison, the average fund in the category has about 26% of its assets in its top 10 positions.

The portfolio’s diversification benefits extend to its regional exposures. It accurately represents the composition of the global market, with U.S. stocks accounting for about 60% of assets. As a result, large American companies feature prominently among its biggest names.

Vanguard Total World Stock Index Performance Highlights

The fund has delivered solid category-relative performance. The exchange-traded fund share class, Vanguard Total World Stock ETF VT, beat the global large-stock blend category average by a little more than 1 percentage point annualized over the 10 years through December 2023. It struggled against its peers in the years following the 2008 global financial crisis when foreign markets were volatile and provided little return. However, its category-relative performance improved dramatically starting in early 2016 as global markets entered a period of sustained stable growth. The ETF share class outperformed the global large-stock blend category average by 1.7 percentage points per year between March 2016 and December 2023, while the slightly more expensive mutual fund share classes were close behind.

Overall, the fund has lived up to its billing. Low-fee, well-diversified index-tracking funds typically post excellent long-term category-relative performance, but they rely on markets appreciating over time, so they may struggle to outperform an average of their actively managed peers when the market provides poor returns.

U.S.-listed stocks have been among the strongest-performing parts of this portfolio. Between March 2009 and December 2023, relatively strong returns pushed their weight from 44% of the fund to more than 60%. Foreign stocks didn’t perform as well, returning less than their historical long-term averages.