If you’re in your 30s, you have one of investing’s greatest advantages on your side: time. With 30 years to go until retirement, you have more than enough time to capture the long-term return of stocks, ride out any corrections or bear markets along the way, and fully fund your lifestyle after you stop working.
But you need to choose the investments that will get you there. In this case, you don’t need to choose anything overly aggressive or risky. You simply need to choose an ETF that invests broadly in stocks and lets you participate in the growth of the U.S. economy over time.
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For me, that fund is the Vanguard Morningstar Total Stock Market ETF (NYSEMKT: VTI).
No need to try to pick winners
The Vanguard Morningstar Total Stock Market ETF’s primary advantage is remarkably simple: It holds the entire investable U.S. stock market, more than 3,500 stocks in total across all sectors, sizes, and styles. Because it’s broadly invested across the entire market, there’s no need to try to pick winning sectors or stocks. You participate in everything regardless of the current market environment.
The fund’s market cap-weighting strategy helps ensure you’re always exposed to the market’s leaders. Take Nvidia, for example. Ten years ago, the stock had a market cap of around $30 billion. Today, it’s at roughly $5.5 trillion.
Over that time, the stock’s influence in this ETF has grown. Its weighting has gone from very little to nearly 7% of the overall portfolio. As the company has become more successful, investors in the Vanguard Morningstar Total Stock Market ETF have gained more exposure to it. It’s a process that ultimately gives greater weight to recent winners and reduces exposure to underperformers.
In other words, you don’t need to do anything. The fund’s regular recomposition and rebalancing keep your investment up to date with what’s happening in the U.S. economy.
30 years can produce remarkable results
Since its inception in 2001, the Vanguard Morningstar Total Stock Market ETF has generated an average annual return of 9.5%. If you combine that kind of return with a 30-year holding period, even modest investments can turn into huge sums of money.
Let’s imagine someone invests $500 a month for 30 years and earns an annual return of 10%. At the end, those investments would grow to approximately $1.13 million.
