As a parent, one thing I often try to emphasize to my children is the importance of hard work. Study a little for a test and you might get a 95. Study more and you might get a 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.
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But when it comes to investing, I think it’s okay to be a little lazy.
While some investors spend hours each week poring over their portfolios and picking stocks to meet their retirement and long-term savings 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 that you can put money into regularly and call it a day.
There is one ETF in particular that I favor for this approach. And if your goal is to grow your money without having to put in much effort, you might want to add it to your portfolio.
How the Vanguard Total Stock Market ETF Lends Itself to “Lazy” Investing
He Vanguard Total Stock Market ETF(NYSEMKT: VTI) It is ideal for lazy investing because it offers broad market exposure in a single fund. As the name implies, when you buy shares of the Vanguard Total Stock Market ETF, you are effectively investing in thousands of U.S. companies across a variety of industries and market capitalizations.
This last point is important. Exposure to large, mid and small cap stocks is crucial because each category plays a different role in a diversified portfolio.
Large cap companies are typically well-established companies with a proven model. Some may be poised for steady growth, while others may have a long history of paying and increasing dividends. These companies can offer the benefit of consistency and can hold up better during periods of market volatility.
Meanwhile, mid-cap stocks tend to be companies that are still growing but have reasonably established businesses. They can offer a good balance between stability and growth potential.
Finally, small cap stocks tend to be less established companies. That can be a mix of things. Small cap stocks may carry more risk, but they also offer great growth potential.
A portfolio composed solely 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 it for you. And if you hold it for the long term, you’re likely to see strong returns.
Over the past 10 years, the Vanguard Total Stock Market ETF has generated a return of approximately 295%. And the cost of this super easy strategy is an expense ratio of just 0.03%, which is pocket change compared to the average expense ratio of 0.72% found in similar funds.
There is nothing wrong with simplicity
You might think that investing in the Vanguard Total Stock Market ETF is taking the easy way out. Well, it is. And if your goal as an investor is to beat the market, then this is not the way to do it.
But if you’re happy with the idea of ​​your portfolio mimicking the returns of the broader market, there’s nothing wrong with avoiding the stress of picking individual stocks and turning to a broad market ETF. And there may be no fund that fits that bill better than the Vanguard Total Stock Market ETF, especially if your goal is to combine simplicity with the safeguards that come with having 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 stocks mentioned. The Motley Fool has a disclosure policy.
This “Lazy” ETF Could Be the Easiest Way to Invest Your Money was originally published by The Motley Fool
