Vanguard U.S. Total Market Index ETF (VUN) Review
After covering some popular exchange-traded funds (ETFs) offered by BMO Global Asset Management, now we are taking a look at another giant fund manager in Canada, Vanguard Investments Canada Inc. or simply, Vanguard. The US branch of Vanguard boasts about 80 ETFs and the Canadian arm manages about 37 ETFs. In this article, we will focus on Vanguard U.S. Total Market Index ETF; ticker symbol VUN, listed in the Toronto Stock Exchange (TSX).
Vanguard came into Canada in 2011 and has been a leader in keeping investment costs lower than its peers. Since then, it has also grown to be one of the key players in the investment front in Canada with a sizable collection of ETFs and mutual funds. Vanguard Group is one of the largest investment firms in the world with over $9.1 trillion assets under management and over 30 million clients worldwide.
The Vanguard U.S. Total Market Index ETF (VUN) is something special. If you feel like spreading out your investment in all the companies in the US, this is the ETF for you. VUN attempts to replicate, to the extent possible, the broad equity market of the United States. This seems like an impossible task considering the sheer number of public companies in the US. However, VUN tracks the performance of the CRSP US Total Market Index to achieve its objective.
The Center for Research in Security Prices (CRSP) creates certain indexes that can be tracked or replicated by investment firms such as Vanguard. CRSP’s total US market index contains nearly 4,000 companies across mega, large, mid, small, and micro capitalizations. This is said to capture about 99.5% of the total US equity market.
| Quick Facts | VUN.TO |
|---|---|
| Fund inception date | August 02, 2013 |
| Net Assets (Sept 30, 2021) | $4.9 billion |
| Exchange | Toronto Stock Exchange |
| Annualized distributions yield | 0.94% |
| Distribution frequency | Quarterly |
| Management expense ratio | 0.16% |
| Account eligibility | TSFA/RRSP/RESP/RRIF/DPSP |
VUN ETF pays a nominal dividend of 0.94% annually. Investors of this ETF might not be able to enjoy significant cash incomes but it has delivered sufficient capital appreciation over the years.
Vanguard provides some statistical analyses to evaluate VUN’s performance against its benchmark CRSP US Total Market Index. An R-Squared of 1, Beta of 0.99, and an Alpha of -0.02 all mean that VUN has been almost perfectly successful in tracking its benchmark index. The standard deviation of VUN is 14.88% and the standard deviation of the CRSP US Total Market Index is 14.98%. Both these numbers represent a solid growth compared to a previous period of either of the indexes. The fact that there is only a 0.1% difference between the standard deviation between these two indices tells us that both indices have been performing quite similarly — this is the entire objective of VUN. Given these matrices, we can rate VUN as a low-medium risk investment.
Vanguard U.S. Total Market Index ETF (VUN) Holdings
As we mentioned above, VUN tracks the performance of the CRSP U.S. Total Market Index which has almost 4,000 companies within its portfolio. Similarly, VUN holds a similar number of holdings at similar weights to replicate its benchmark index.
At the time of this article, VUN holds 3,991 different company stocks from the US equity market. Below are the top 20 holdings of VUN as of October 31, 2021.
| Holding Name | Weightage |
|---|---|
| Microsoft Corp. | 5.21% |
| Apple Inc. | 4.92% |
| Amazon.com Inc. | 3.03% |
| Alphabet Inc. Class A | 1.86% |
| Tesla Inc. | 1.86% |
| Alphabet Inc. Class C | 1.68% |
| Facebook Inc. Class A | 1.61% |
| NVIDIA Corp. | 1.27% |
| JPMorgan Chase & Co. | 1.06% |
| Berkshire Hathaway Inc. Class B | 1.03% |
| UnitedHealth Group Inc. | 0.90% |
| Johnson & Johnson | 0.89% |
| Home Depot Inc. | 0.82% |
| Bank of America Corp. | 0.75% |
| Visa Inc. Class A | 0.74% |
| Procter & Gamble Co. | 0.72% |
| Adobe Inc. | 0.64% |
| Walt Disney Co. | 0.64% |
| Netflix Inc. | 0.63% |
| Mastercard Inc. Class A | 0.61% |
With these holdings, the technology sector makes up almost 30% of the assets by investment in VUN. This is closely followed by the consumer discretionary sector with 16%, industrials with 13%, the health care sector with 12.8%, and more.
At the time of the article, VUN also consisted of almost 70% large-cap companies. This is followed by medium market capitalization stocks with12.68%.
Vanguard U.S. Total Market Index ETF (VUN) Performance
Since its inception in 2013, VUN has been able to deliver an average of 16% annual returns. This translates to about 258% returns since its inception. An investment of $10,000 in this ETF in 2013 would have grown to be $36,957 by end of October 2021.
Is VUN ETF for You?
Sometimes picking stocks can be a daunting task. There is so much (even too much) choice and things can get overwhelming. You can invest in an ETF like Vanguard U.S. Total Market Index ETF to get exposure to the entire US equity market. There are both pros and cons to this investment strategy. However, even with as diverse exposure as the entire US stock market, this ETF should only be a portion of your investment portfolio. While VUN ETF can give you growth over the long run, add some income-focused ETFs to generate incomes from your investments.
Check out the latest information about the fund on Vanguard.
Disclosure: Any information given in this article is not to be construed as investment advice. You must do your own research before investing any money in the stock market. All investments carry inherent risks even with the possibility of losing all your money.
