If I Could Only Hold 1 ETF for the Next 20 Years, Here’s What I’d Buy
If you were to buy a single ETF and hold it for the next 20 years, what would you choose? Something related to the artificial intelligence (AI) theme? The broader tech sector? Maybe a specific country?
I’d go for something different.
If I were to choose just one ETF to hold for the next two decades, it would be the Vanguard Total Stock Market ETF (VTI +0.82%). Instead of trying to predict individual winners, I simply want to own everything and participate in long-term U.S. economic growth.
Here’s why.
Source: Getty Images.
The case for buying the entire stock market
The Vanguard Total Stock Market ETF tracks the entire investable U.S. equity market. It owns more than 3,500 stocks in total across all industries and market caps. It charges an expense ratio of just 0.03%. That means that while you still own the dominant tech companies, such as Nvidia, Apple, and Microsoft, you get thousands of smaller, lesser-known, and potentially faster-growing companies.
This diversification could be critically important. For most of the past 15 years, large caps have outperformed small caps. There have been brief periods when small caps have done well, such as the 2020 post-COVID recovery, but no sustained multiyear stretches.
But that’s been changing. Small caps have been outperforming for roughly the past 15 months. Conditions could finally be lining up for small company stocks as the mega-cap AI boom shows signs of maturing.
The Vanguard Total Stock Market ETF has a relatively modest 25%-28% of assets committed to mid- and small-cap stocks. You still get significant large-cap exposure, but there’s enough of a tilt to give this fund the opportunity to outperform the S&P 500.
Vanguard Morningstar Total Stock Market ETF
Today’s Change
(0.82%) $3.07
Current Price
$376.31
Key Data Points
AUM
$2.3T
Dividend Yield
1.04%
Expense Ratio
0.03%
Top Holdings
NVDA
6.40%
AAPL
6.29%
MSFT
4.79%
VTI won’t be the biggest winner, but that’s OK!
Over the next 20 years, there are obviously going to be sectors, themes, and markets that beat the S&P 500 and the broader market. But nobody knows what they’ll be.
Sure, you can take a swing on the Vanguard Information Technology ETF (VGT +1.20%) or the Vanguard Growth ETF (VUG +0.93%). You may even be proven right over time.
But the end of the AI boom could also make tech an underperformer over the next several years. You just never know.
That’s why I prefer to just buy the whole thing (through VTI). By doing that, you’re betting that the U.S. economy will continue to grow, which is very likely over a 20-year period. There’s a lower ceiling with this strategy, but there’s also a higher floor. Volatility is better managed, and there’s less boom/bust potential.
There are plenty of good, defensible ETF choices that you could make for the next two decades. For me, the Vanguard Total Stock Market ETF presents the best case.
David Dierking has positions in Apple, Vanguard Information Technology ETF, and Vanguard Morningstar Total Stock Market ETF. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, and Vanguard Morningstar Growth ETF. The Motley Fool has a disclosure policy.
