Investing in the entire stock market can be a good way to truly diversify your portfolio and reduce your overall risk. And while you could own dozens of stocks, the truth is, you really don’t need to. All you need is a good, diverse exchange-traded fund (ETF) which can give you broad exposure. Unless you’re comfortable tracking stocks and like picking individual investments, you may just want to consider owning an ETF which will give you some excellent diversification.
If you’re that type of investor, then one fund you’ll want to consider is the Vanguard Total World Stock Index Fund ETF (NYSE Arca:VT). What stands out about this fund is the sheer number of stocks it contains. Its portfolio includes around 10,000 stocks with a median market cap of more than $95 billion. While you’ll get exposure to big names like Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) with the fund, they each make up less than 4% of the ETF’s overall weight. Even if they do really well, their individual performances won’t have an oversized impact on the ETF, which can be ideal for risk-averse investors.
You will likely sacrifice some gains in return for safety with the fund, however. In the past 10 years, the Total World Stock fund has generated total returns (including dividends) of 146%. The S&P 500, by comparison, has amassed returns of 248% during that same period.
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If you value safety and are okay with giving up potentially higher returns in exchange for that, the Total World Stock ETF can be a solid investment to consider for the long haul. While you might not end up with sky-high returns, it can be a great way to steadily grow your portfolio in the long run.