Financial Analysis Report: Vanguard Total World Stock ETF (VT)

1. Executive Summary

The Vanguard Total World Stock ETF (VT) provides investors with a globally diversified equity portfolio, tracking the FTSE Global All Cap Index. This ETF encompasses large-, mid-, and small-cap stocks from both developed and emerging markets, making it a core holding for long-term investors seeking global diversification. The fund has a low expense ratio and has historically delivered competitive returns relative to global equity markets. This report analyzes VT’s key financial metrics, portfolio composition, performance trends, risk factors, and investment outlook.

2. Fund Overview

2.1 Fund Objective and Strategy

VT aims to provide broad exposure to global equities by passively tracking the FTSE Global All Cap Index, ensuring long-term capital appreciation. Its holdings span multiple geographies and sectors, reflecting the global market composition.

2.2 Key Details

  • Fund Sponsor: Vanguard
  • Inception Date: June 24, 2008
  • Expense Ratio: 0.07%
  • Assets Under Management (AUM): $42.417 billion (as of February 2025)
  • Number of Holdings: Over 9,000 stocks
  • Dividend Yield: 2.88% (Trailing 12 Months)
  • Ticker Symbol: VT
  • Exchange: NYSE Arca

3. Portfolio Composition & Asset Allocation

3.1 Regional Allocation

VT provides exposure to a diversified set of equities worldwide, with the following approximate allocation:

  • North America: 60% (U.S. and Canada)
  • Europe: 15%
  • Asia-Pacific: 15%
  • Emerging Markets: 10%

3.2 Sector Allocation

As of December 31, 2024, VT’s sector allocations are:

  • Technology: 27.6%
  • Financials: 15.0%
  • Consumer Discretionary: 14.5%
  • Industrials: 13.6%
  • Healthcare: 9.4%
  • Consumer Staples: 4.7%
  • Energy: 4.0%
  • Basic Materials: 3.1%
  • Utilities: 2.8%
  • Real Estate: 2.7%
  • Telecommunications: 2.6%

3.3 Top Holdings

VT holds a wide range of stocks, with its largest holdings being:

  1. Apple Inc. (AAPL)
  2. Microsoft Corp. (MSFT)
  3. Amazon.com Inc. (AMZN)
  4. NVIDIA Corp. (NVDA)
  5. Alphabet Inc. (GOOGL)

These top five holdings account for a significant portion of the fund’s total assets and contribute to its strong historical performance.

4. Performance Analysis

4.1 Historical Performance

Year VT Price Return (%) Benchmark Return (%)
2024 14.2% 14.5%
2023 17.3% 17.8%
2022 -18.4% -18.1%
2021 21.2% 21.5%
2020 16.5% 16.8%

Over the past decade, VT has provided an average annual return of 9.53%, closely tracking the global equity market.

4.2 Year-to-Date (YTD) Performance

As of February 8, 2025, VT has delivered a YTD return of 3.24%, driven by strong technology sector performance and continued economic resilience in the U.S.

4.3 Dividend History

VT provides a dividend yield of 2.88%, with quarterly distributions. The ETF’s dividend growth rate over the past five years has averaged 10.85% annually.

5. Risk Factors

5.1 Market Risk

Since VT is a globally diversified fund, it is subject to broad market fluctuations based on economic conditions, interest rate changes, and global economic cycles.

5.2 Currency Risk

VT holds assets in multiple currencies, exposing investors to foreign exchange fluctuations. A strong U.S. dollar can negatively impact returns from non-U.S. holdings.

5.3 Emerging Market Volatility

Approximately 10% of VT’s holdings are in emerging markets, which are subject to political instability, inflation, and regulatory changes.

5.4 Economic Downturns

A global recession or economic slowdown in major markets could negatively impact VT’s performance, reducing corporate earnings and market valuations.

6. Investment Outlook & Recommendations

6.1 Bull Case (Positive Scenario)

  • Continued Technology Growth: If the technology sector maintains its momentum, VT could see significant gains.
  • U.S. Market Strength: A resilient U.S. stock market, which comprises a majority of VT, could further boost returns.
  • Emerging Market Recovery: A rebound in emerging markets would enhance diversification benefits and overall returns.

6.2 Bear Case (Negative Scenario)

  • Global Recession Risks: Economic slowdowns in key markets could lead to declining stock valuations.
  • Geopolitical Tensions: Trade disputes, conflicts, or political instability in major regions could negatively impact VT’s performance.
  • Interest Rate Hikes: If central banks maintain a tight monetary policy, equity valuations could face downward pressure.

6.3 Recommendation

For long-term investors, VT remains a strong choice due to its broad diversification, low expense ratio, and exposure to global markets. However, investors with a short-term horizon should be cautious about market volatility.

  • Risk-Averse Investors: Hold VT as a core component of a well-diversified portfolio.
  • Aggressive Investors: Consider adding sector-specific ETFs for higher returns while keeping VT as a foundational investment.

7. Conclusion

The Vanguard Total World Stock ETF (VT) is a compelling investment for those seeking global diversification at a low cost. Its broad exposure to equities worldwide makes it a resilient choice for long-term investors. While risks exist, VT has historically delivered solid returns and remains an attractive option for those looking to gain exposure to the entire global equity market.

Disclosures

This report is for informational purposes only and does not constitute financial advice. Investors should conduct further research or consult a financial advisor before making investment decisions.