Many investors lean on the S&P 500 as the backbone of their portfolios, but experts are advocating for broad market exchange-traded funds (ETFs) as a superior alternative. These ETFs are touted for their ability to hold thousands of stocks with minimal expense ratios, making them ideal for long-term capital growth.
One ETF that stands out is the Vanguard Total Stock Market ETF (VTI), which some consider the best buy-and-hold fund available. Unlike the commonly used Vanguard S&P 500 ETF, which focuses solely on the 500 largest U.S. companies, the Vanguard Total Stock Market ETF offers a more comprehensive representation of the U.S. equity market by tracking the CRSP US Total Market Index. This index encompasses about 3,500 different stocks, including giants like Nvidia, Apple, Microsoft, Amazon, and Alphabet.
This ETF is market cap-weighted, lending focus to larger companies while dedicating approximately 25% of its holdings to mid-, small-, and micro-cap stocks. Recent trading has shown a notable increase, with the ETF’s price rising by 1.89% currently valued at $340.22, reflecting its strong market presence.
Investors often concentrate on large-cap stocks, which have outperformed in recent years. However, a diversified approach, including investments in smaller companies, presents an opportunity to benefit from the cyclical nature of the market. Large caps and small caps typically fluctuate in performance over time, and incorporating both can help mitigate volatility.
2026 has kicked off with a noticeable rotation away from the previously dominant megacap growth stocks. As of early February, the tech sector ranks as only the eighth-best performing segment of the S&P 500. In contrast, sectors such as energy, materials, and consumer staples have surged, outperforming the S&P 500 by at least seven percentage points. Small caps have also shown promising leads, outpacing their larger counterparts by about five percentage points.
This shift highlights the importance of diversification, as it can protect against market uncertainties and enhance return potential. If small-cap stocks are indeed entering a phase of prolonged outperformance, the Vanguard Total Stock Market ETF could continue to gain traction over the S&P 500 during 2026. Furthermore, this ETF may provide a buffer against high valuations while potentially lowering overall portfolio risk.
In summary, the argument for holding the entire U.S. stock market rather than focusing solely on large caps is gaining traction, suggesting that broad market ETFs like VTI could represent a wise choice for long-term investors.
