One of the first bits of advice that most people hear when they start investing is "diversify." Buying a diversified portfolio with lots of different stocks can help manage your risk and improve your chances of growth and success as a long-term investor. But what's the best way to diversify for the long run? For me, it's the Vanguard Morningstar Total Stock Market ETF (NYSEMKT: VTI).
This fund owns 3,531 stocks of all sizes (small, mid, and large cap). It represents basically the entire U.S. stock market. And it charges a rock-bottom low-price expense ratio of 0.03%.
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Continue » This is my "set it and forget it" U.S. stock ETF. It's the largest piece of my portfolio. I buy more shares of it every month on every payday.
But over the past 10 years, this total stock market ETF has been outperformed by the S&P 500 index, which tracks the 500 largest companies in America. Which is better, owning VTI or an S&P 500 ETF? I'm going to keep buying the Vanguard Morningstar Total Stock Market ETF, because I believe owning 3,531 U.S. stocks will be a better bet than "only" 500 stocks in the long run.
Let's look at why I'm sticking with VTI for the long run. The Vanguard Morningstar Total Stock Market ETF doesn't make you choose between the S&P 500 and other smaller companies. It lets you own basically the entire U.S. stock market.
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