Meet the First ETF to Exceed $2 Trillion in Net Assets. Discover Why It’s an Excellent Investment This October

Many of the world’s biggest index funds and exchange-traded funds (ETFs) are based on the S&P 500. The Vanguard S&P 500 ETF ( VOO -0.02%) manages an impressive $1.37 trillion in assets. Other well-known ETFs, such as the SPDR S&P 500 ETF and the iShares Core S&P 500 ETF, each hold more than $650 billion in assets. The Invesco QQQ Trust, which tracks the Nasdaq-100, has accumulated over $365 billion in assets.

Despite the massive size of these funds, none surpass the Vanguard Total Stock Market ETF ( VTI 0.03%), which recently crossed the $2 trillion mark in assets. Here’s what makes this ETF different from S&P 500 index funds and why it stands out as a strong option for long-term investors today.

How the total stock market differs from the S&P 500

The most valuable American companies have been driving the market’s growth. Nvidia, Microsoft, and Apple together account for 20% of the S&P 500 index. The so-called "Ten Titans"—Nvidia, Microsoft, Apple, and seven other large-cap growth companies—collectively represent 39% of the index.

While the S&P 500 covers about 80% of the U.S. stock market, what about the remaining 20%? That’s where the Vanguard Total Stock Market ETF has an advantage.

This ETF includes over 3,500 stocks, compared to just 504 in the Vanguard S&P 500 ETF. Importantly, both funds charge the same low expense ratio of 0.03%, or $0.30 for every $1,000 you invest. So, choosing the Total Stock Market ETF doesn’t cost more than investing in an S&P 500 index fund.

It’s true that over the last ten years, the Vanguard S&P 500 ETF has slightly outpaced the Total Stock Market ETF, mainly due to the strong performance of mega-cap growth stocks. Even a modestly higher allocation to the Ten Titans has made a noticeable difference.

VOO Total Return Level data by YCharts

Low-fee ETFs are a great way for investors to build a diversified portfolio without needing substantial funds. Along with their minimal fees, both the Vanguard Total Stock Market ETF and the Vanguard S&P 500 ETF have a minimum investment of just $1. Such low barriers and costs would have been unthinkable just a few decades ago.

The Vanguard Total Stock Market ETF is a solid pick for those who want exposure to the entire U.S. stock market, not just an index like the S&P 500 or Nasdaq-100. However, since the S&P 500 makes up such a large portion of the market, the Total Stock Market ETF’s performance will closely mirror that of the index.

Let ETFs work for you

Rather than getting lost in the differences between these funds, it’s more important to clarify your goals for investing in ETFs.

ETFs can play different roles in a portfolio. For instance, if you’re interested in artificial intelligence (AI) stocks but aren’t sure where to start, you could choose an AI-focused ETF. Or, if you’re a growth investor seeking more passive income, high-yield ETFs might be appropriate. These types of ETFs are especially helpful for filling gaps in your portfolio when you lack strong convictions about a particular sector.

Purchasing ETFs that heavily overlap with stocks you already own can lead to redundant holdings and limit diversification. For example, if your largest investments are in mega-cap tech companies like Nvidia, Microsoft, and Apple, buying an S&P 500 index fund for broader exposure may not add much diversification, given these firms’ dominance in the index.

That’s why the Vanguard Total Stock Market ETF is ideal for investors who aren’t targeting a specific goal, but instead want a broad-based way to invest in the market, with slightly less concentration in the largest companies than the S&P 500.