As a parent, I often try to emphasize to my children the importance of hard work. Study a little for a test and you might come away with a 95. Study harder and you might get a score of 100 instead.
I’m also no stranger to hard work. There’s a reason I spend 40 hours or more a week at my desk as a freelance writer when I could probably get away with working less. I’m a big fan of the reward.
But when it comes to investing, I think there’s nothing wrong with being a little lazy.
A portfolio also including mid- and large-cap stocks ensures balance. (Michael Nagle/Bloomberg via Getty Images)
While some investors spend hours each week reviewing their portfolios and choosing stocks to meet their long-term savings and retirement goals, others may prefer a more hands-off approach. And I think it’s totally fine to find a lazy person’s ETF, or exchange traded fund, in which you can invest money regularly and call it a day.
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There is one ETF in particular that I am a fan of for this approach. And if your goal is to develop your money without having to put in a lot of effort, you may want to add it to your portfolio.
How the Vanguard Total Stock Market ETF Lends to “Lazy” InvestingThe Vanguard Total Stock Market ETF is ideal for lazy investing because it provides broad market exposure in a single fund. As the name suggests, when you buy shares of the Vanguard Total Stock Market ETF, you are effectively investing in thousands of U.S. companies across a range of sectors and market caps.
This last point is important. Exposure to large, mid and small caps actions is crucial because each category plays a different role in a diversified portfolio.
Teleprinter Security Last Change Change % VTI VANGUARD TOTAL STOCK MARKET ETF – USD DIS 369.36 -0.10 -0.03% Large-cap companies are typically well-established businesses with a proven model. Some may be poised for steady growth, while others may have a long history of paying and increasing dividends. These businesses can offer the benefit of consistency and be more resilient during periods of market volatility.
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Mid-cap stocks, on the other hand, are generally companies that are still growing but have reasonably established businesses. They can provide a good balance between stability and growth potential.
Finally, small-cap stocks tend to be less established companies. This may be a mixed bag. Small-cap stocks may carry more risk, but they also offer significant growth potential.
A portfolio consisting only of small-cap stocks can be risky. But a portfolio that also includes mid- and large-cap stocks provides balance.
With the Vanguard Total Stock Market ETF, you don’t have to rack your brain trying to find the ideal allocation between large-, mid-, and small-cap stocks. The fund itself does this for you. And if you stick with it for the long term, you’ll likely see solid returns.
A BEGINNERS-FRIENDLY ETF PORTFOLIO THAT REQUIRES ALMOST NO MAINTENANCE AND PROVIDES LONG-TERM RESULTS
ETFs may trade at small premiums or discounts to the value of their underlying holdings. (Spencer Platt/Getty Images)
Over the past 10 years, the Vanguard Total Stock Market ETF has returned approximately 295%. And the cost of this ultra-simple strategy is just 0.03% expense ratio, which is pocket change compared to the average 0.72% expense ratio found in similar funds.
There’s nothing wrong with simplicityYou might think that investing in the Vanguard Total Stock Market ETF is an easy way out. Well, it is. And if your goal as an investor is to beat the market, this is not the way to do it.
But if you’re happy with the idea of your portfolio mimicking the returns of the market as a whole, there’s nothing wrong with avoiding the stress of picking stocks individually and settling on a broad-market ETF. And there’s perhaps no fund that meets this demand better than the Vanguard Total Stock Market ETF, especially if your goal is to combine simplicity with the guarantees associated with a diversified portfolio.
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Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the securities mentioned. The Motley Fool has a disclosure policy.
