The Vanguard Total Stock Market ETF (VTI) traded close to its all-time peak on Monday, reaching approximately $372.37 in late morning trading, up 1.6% on the day. The broad market fund continues to attract attention as investors weigh its relatively low expense ratio against a backdrop of elevated bond yields and concentrated tech exposure.
VTI, which tracks the entire U.S. stock market, has an expense ratio of just 0.03%, making it one of the cheapest ways to gain diversified exposure to large-, mid-, and small-cap equities. However, its top holdings are heavily weighted toward technology giants: Nvidia, Apple, and Microsoft alone account for about 17% of the fund, while the top ten names represent nearly 34% of total assets, according to recent analysis.
Valuation metrics present a mixed picture. The trailing price-to-earnings (P/E) ratio stands at 26.3, well below the fund's five-year average of 41.1. The forward P/E is approximately 19.6, suggesting investors are anticipating earnings growth to justify current prices. However, the earnings yield—the inverse of the P/E ratio—comes in at 3.8%, below the 10-year U.S. Treasury yield of 4.44% as of Monday morning, according to MarketWatch. This gap implies that investors are counting on future earnings growth to make stocks more attractive than bonds.
The 10-year Treasury yield hovered near 4.44% early Monday, slightly below its previous close, as reported by MarketWatch. Trading Economics listed the yield at about 4.45% for June 15. Despite a slight dip, bond yields remain above the earnings yield of VTI, keeping the risk-reward tradeoff for U.S. equities under scrutiny.
Some investors are shifting their focus within Vanguard's lineup rather than exiting equities entirely. The Vanguard Value ETF (VTV), which also carries a 0.03% expense ratio, has outperformed VTI over the past year. As of June 13, VTV posted a one-year return of 26.89%, compared to VTI's 24.78%. VTV also offers a higher trailing dividend yield of 1.88% versus VTI's 1.01%, and its five-year monthly beta of 0.72 indicates lower volatility than VTI's 1.03 beta.
While VTI provides comprehensive exposure to the entire U.S. market, its performance is heavily influenced by the technology and artificial intelligence sectors. In contrast, VTV is tilted toward large-cap value stocks, with top holdings including JPMorgan Chase, Berkshire Hathaway, and Exxon Mobil, giving it a heavier weighting in banks, healthcare, and industrials.
The divergence between these two funds highlights a key decision for long-term investors: whether to stick with a broad market ETF trading near record highs or shift to a value-oriented fund that offers more income and less volatility. With bond yields still above equity earnings yields, the choice may hinge on whether earnings growth can close the gap.
