VTS is a Vanguard Investment product. It tracks the total US stock market index. You can read more here.
This week I bought a small amount of VTS, opening my position in investing in VTS.
VTS is one of the most popular ETFs that Australians invest in. It exposes us as Australia residents to the US market. In a way, we can invest into US market by buying VTS and related products.
You don’t need to beat the market, you go with the market. And ETFs are a good and simple way to do that.
ETF stands for Exchange-traded fund. It is a stock that involves other stocks. Normally an ETF will track an underlaying index of a collection of stocks. We have ETF that tracks Gold price (NYSEARCA:GLD), we have ETF that tracks Steel price (NYSEARCA:SLX). Basically we can group anything that share a common characteristic, and create an ETF for it.
With the above concept, an ETF should reflect the average value of the underlaying securities. This also applies to ETFs that track a group of company stocks. VTS tracks the whole US market, meaning it is the representative of all companies that operate in United States.
By investing into an ETF, a busy person can just keep pouring capitals into ETF without thinking about picking stocks. Therefore freeing up the time to concentrate to other important matters.
As stated above, VTS tracks the whole US market. Considering US companies have the potential to grow a lot more than Australian companies. It makes sense to expect a higher growth rate by investing into an US market tracking ETF.
VTS historical performance
From the earliest recorded time (2009) to the most recent days, amid the CoVid-19 crisis in 2020, the value has grown from $60.30 to a whopping amount of $204.20. An increment of nearly 3,400% within 11 years. That is 11.72% compounded rate annually.
Not a lot of investment instrument can perform like that over a long time, especially when you don’t need to think about it and basically just keep throwing money buying ETF.
To compare against Australian share index, VAS.
VAS historical performance
We can see that even without the drop (peak at about $90.55), the compounded rate of return after 11 years is about 5.4% annually. A figure that is much lower than the US market.
But what about VHDG, tracking a bunch of ETFs itself?
Let’s take a look at the historical performance.
VHDG historical performance
There is not much to discuss here, since VHDG does not have a long track record comparing to the above 2 ETFs. But from what we can see, it grows at compounded return of about 6.5% annually. This rate is not bad for our current situation, when the RBA cash rate is at all time low.
Considering all historical data, I have positioned myself into VTS. With the current drop, I have the advantage of investing in 2019 again (the current price is the same as early 2019).
In the future, I will pour more capitals into VTS, mainly because I have passion with real estate and decided that it will be my main investment form. Stock market will be my secondary. Therefore I do not want to spend much time picking stocks.
By Tuan Nguyen