Vanguard Total World Stock Index VT offers unrivaled diversification. This comprehensive portfolio holds a piece of every investable stock in the world and marries it to a low fee. These features should make it tough to beat over the long run. It earns a Morningstar Analyst Rating of Gold.
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 tends to accurately value 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 15% of its assets, making it one of the least concentrated portfolios in the world large-stock blend Morningstar Category. By comparison, the average fund in the category has about 25% 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.
The fund’s low fee has translated into solid performance. The Admiral and exchange-traded share classes both beat the category average by 1.1 percentage points annualized over the trailing 10 years through December 2021. Most of that advantage came from the ultralow expense ratios attached to each share class. Rock-bottom fees should continue to give this fund a long-term edge.
Key Proprietary Morningstar Metrics for Vanguard Total World Stock ETF
Morningstar Analyst Rating: Gold Process Pillar: High People Pillar: Above Average Parent Pillar: High
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