VT

VT: As Passive As Practically Possible
January 29, 2023

Summary

• The Vanguard Total World Stock ETF is one of the leading ETFs to invest truly passively in global stock markets.
• Passive investing means holding the market portfolio. Applied to equities, this is the market-cap weighted portfolio of all available stocks in the world. By definition, this goes beyond the US.
• Since 2008, the US market has a tracking error of 6.6% compared to VT. The active share currently stands at 41% which makes a pure-US portfolio a quite active strategy.
• Historically, active bets on the US were well rewarded. But it’s unclear if this pattern continues. The case for passive investing and global diversification is therefore as strong as ever.
• VT tracks the FTSE Global All Cap Index and holds 9,473 stocks from 49 countries. With just 0.07% TER, it is thus a very efficient instrument for global passive investors.