The Only Index Fund I Would Buy and Never Sell Is the Vanguard Total Stock Market ETF (VTI)

Which fund would I buy and never sell? Well, that’s a hard question to answer, but right now, I think a solid candidate would be the Vanguard Total Stock Market ETF (VTI +0.42%).

It’s an exchange-traded fund (ETF), which means it’s a fund that trades like a stock. It’s also an index fund, and it includes not just the 500 big American companies in the S&P 500 index but just about all of the U.S. stock market — more than 3,500 stocks.

Buying into this index fund will quickly have you invested in just about all of the U.S. stock market. So if you’re bullish on America’s economic future, you should be bullish on the Vanguard Total Stock Market ETF.

Here are some reasons I like this fund:

• I like its broad scope. Remember, after all, that in some years, small companies will outperform big ones, and in other years, the opposite will be true. An S&P 500 index fund is great, but it only invests you in big and huge companies, ignoring small-cap stocks and many mid-cap ones, as well. This fund represents much more of the overall U.S. stock market. Recently, about 9% of the ETF’s assets were in small companies, and about 20% in mid-sized ones.
• It still puts a lot of weight into huge tech stocks. This includes the “Magnificent Seven,” all of which are among the top 10 holdings, which together make up about 34% of the ETF’s total value. I’m a little conflicted on this count, though. I like that concentration, because these tech companies have been growing rapidly and have great potential for further growth. But on the other hand, when the market pulls back, they can fall harder than other companies. And having a third of the fund’s value in just 10 stocks is quite concentrated.
• I like that it will deliver reasonable returns. It can’t do much worse than the overall market, because it is the overall market. It won’t deliver outsized returns, either, though.
• It pays a dividend, though not a huge one. Its dividend yield was recently 1.12%. Still, over time, as many of the index’s components increase their dividends, the ETF should pay more.
• It’s a Vanguard fund, and Vanguard is known for charging very little in fees. Indeed, this ETF’s expense ratio (annual fee) is 0.03%, meaning that you’ll fork over $3 per year for every $10,000 you have invested in the ETF.

So give this ETF some consideration for your own long-term portfolio. But if you’re seeking growth above all, know that there are other ETFs that have delivered higher returns. And if you’re seeking income, there are some excellent dividend-focused ETFs, too.