VT: Two letters that own pretty much everything you need to own

Welcome to the eighth post of The Invested Counsel—thoughts about financial planning for young lawyers.

In last week’s post, I introduced The Sentence, which provides long-term investing advice in 25 words. As The Sentence indicated, you can follow this advice by making a purchase of one single investment, an exchange traded fund (or ETF). In today’s post, I will discuss one such ETF: VT.

What is VT?

“VT” is the unique code (or “ticker”) for the “Vanguard Total World Stock ETF.” VT is an investment that owns most public companies in the world.

VT was created by Vanguard, an investment adviser and manager. They create lots of ETFs and mutual funds. They were founded by John Bogle, who was one of the first people to develop the concept of an index fund for individual investors (i.e., regular people).

How do I learn more about VT?

To understand VT, and to better understand how to evaluate a potential investment like an ETF, it is good to review the basic information about the investment. Most of the key information is publicly available online; for this post, I’m going to walk through the summary of VT provided on Vanguard’s website. You can find it here. These overviews provide a lot of information, so I’m just going to focus on the key pieces of information that you should focus on when considering whether or not to invest in something.

What does VT invest in?

If you click on the “Portfolio composition” tab, you’ll see that VT invests in 10,048 stocks.

That is obviously a lot of stocks, since it owns virtually every public stock in the world.

Of those companies, about 62% of the total value of those companies is in the United States, and the rest (about 38%) is in the value of companies in all other countries of the world:

Note that this does not mean that 62% of all of the companies in the world are U.S. companies; it means that U.S. companies make up 62% of the total market capitalization of all companies in the world.

The next biggest countries represented are Japan (5.9%), Taiwan (3.5%), the United Kingdom (3.1%), Canada (2.9%), and South Korea (2.8%). The rest of the fund is invested in other countries.

Because VT owns pretty much every stock in the world, it’s a reasonable proxy for the stock market across the whole world. That means that about 62% of the entire world’s public companies are U.S. companies.

(Note that this just applies to “public” companies, or companies that can be bought and sold by individuals and institutions. The “stock market” (as we normally think of it) does not include large companies that are not available to the public. That’s why China (which has lots of huge companies) represents only 2.6% of the total market; you can’t buy lots of the companies in China.)

Because VT is market-cap weighted, its largest investments are in the largest companies in the world. Here are VT’s top five holdings:

As this shows, VT is invested more heavily in NVIDIA more than any other company, because it is so large.

Much further down on the list are much smaller companies, like Tsutsumi Jewelry:

If you are looking for an engagement ring in Japan, and for some reason don’t want to buy one at Costco, maybe check them out here.

The point is that if you buy VT, you’ll own a huge variety of companies, from the biggest to the smallest.

Is VT a good investment?

Yes. Here are the annualized returns for VT over certain periods of time. “Annualized returns” are the average annual return over that period. For example, if you had invested in VT a year ago, your investment would have increased by about 25% over that year. If you had invested in it ten years ago, you would have made about 13% per year.

Here are the cumulative returns (i.e. how much your investment would have increased in total). Thus if you had invested in VT 10 years ago, your investment would have grown by 234%.

Does this mean that I can invest in VT and expect to get a similar return in the future?

No. You will not get the same return. As the charts above show, the return varies widely depending on how far you go back. I have no idea how VT (or the stock market in general, or any particular stock) is going to do in the future. All I know is that over the long term, investments like VT (which own stocks) are likely to go up in value.

Does this mean that I can expect to get 13% a year each year?

No. The 13% that VT went up each year is an average of the returns over the last 10 years. Here is how VT has done over the last 10 years:

Some years it did well; in 2025, VT went up about 22%. And in other years, it did poorly: in 2022, VT went down about 18%. Thus in order to get the 13% average annual return, you would have needed to sit on your butt for 10 years and do nothing, and only by doing that would you have averaged out to 13% per year.

Note that an annual return of 13% is extremely good. The chances of that happening again over the next ten years is very very low.

Can’t I just sell VT before it goes down, and buy it before it goes back up?

No. You don’t know when the stock market (and by extension VT) is going to go down, or when it is going to go up. People who try to do that almost invariably fail. Don’t be one of those people.

Why do I need to buy all of these stocks? Wouldn’t it be better to buy the ones that are going to go up, and avoid the ones that are going to go down?

No. You don’t know which stocks will do well, and which will do poorly. No one does. But if you own all of the stocks in the world, you’ll be sure to own the ones that do really well, which are the ones that end up making investors the most money.

How much does VT cost?

The expense ratio for VT is 0.06%. That is not a lot of money. There are some ETFs and investments that are cheaper, but this is extremely inexpensive.

VT is so inexpensive because it is very easy to run. The people responsible for VT just buy the stocks in proportion to their sizes, and move on. They are not doing research into each of the companies, trying to decide which companies are going to do well, and which are going to do poorly.

Why would I invest in something where no one is thinking about what is a good investment? Wouldn’t it be better to invest in something where smart people are trying to do better than just mindlessly follow the market?

No. In the long run, most investments that try to do better than the market (and by extension, index funds like VT) fail. That’s because it is very hard to beat the market, and you have to pay those smart people to work hard to beat the market. Those fees (e.g., mutual funds or ETFs with an expense ratio of 1% or 2%) eat into an investor’s return.

But can’t I just pick the really smart people who are going to do a good job?

No. You don’t know who is going to better than the market. People who have done well in the past almost always do worse in the future.

Do I need to have an account with Vanguard to buy VT?

No. You can buy VT from an account with Fidelity, Schwab, and lots of other places.

So should I buy VT?

Possibly. VT is a very simple, very inexpensive investment that will do well over the long run. You could do far worse that just buying VT and not touching it.

Do you own VT, or recommend it to your clients?

Yes. For example, I advised my seven-year-old daughter to buy it with her allowance money.

Why?

I’ll explain that in the next post.

That’s all for now. Have a wonderful week.

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