The Vanguard Total Stock Market ETF (NYSEMKT: VTI) is one of the largest investment funds in the entire world. Including its mutual fund variant, investors have $1.8 trillion of assets invested in this Vanguard index fund.
In a nutshell, this fund is designed to provide exposure to the entire U.S. market, as the name implies. Its portfolio of about 3,500 companies includes large-, mid-, and small-cap stocks.
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Like most Vanguard products, it’s a low-cost investment vehicle. The Vanguard Total Stock Market ETF has an expense ratio of just 0.03%, which means that for every $10,000 in assets you hold in it, your annual investment fees are just $3. Those minuscule costs will have a beneficial impact on your investment’s returns over time.
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However, I prefer to take a somewhat different approach to getting broad market exposure. As such, there’s one specific ETF that I would recommend looking into as a substitute for the Vanguard Total Stock Market ETF in your portfolio.
What is the EQAL?
The Invesco Russell 1000 Equal Weight ETF (NYSEMKT: EQAL) holds all 1,000 stocks in the Russell 1000 index, but in roughly equal proportions. Of course, market fluctuations over time will alter that somewhat, but once every quarter, the fund’s managers rebalance it so that 0.1% of the fund’s assets are invested in each of the 1,000 stocks in the portfolio.
If you aren’t familiar, the Russell 1000 is a large- and mid-cap index. The Russell 3000 is considered a total stock market index, while the Russell 2000 — containing the bottom 2,000 stocks of the Russell 3000 — is perhaps the best-known index of small-cap stocks. The Russell 1000 includes the largest 1,000 stocks in the Russell 3000. In short, it includes a broader range of companies than the S&P 500, but it doesn’t offer small-cap exposure.
What it does is allow you to invest in 1,000 companies without risking too much of your money on the performance of any single one. In other words, a megacap giant like Nvidia (NASDAQ: NVDA) or Apple (NASDAQ: AAPL) will account for about the same piece of the ETF pie as a relatively much smaller company like Ciena (NYSE: CIEN) or Lumentum Holdings (NASDAQ: LITE).
The Invesco Russell 1000 Equal Weight ETF has a 0.20% expense ratio, which is significantly more than the Vanguard Total Stock Market ETF, but it is still on the lower end of the fee range for a more specialized ETF.
Why do I like EQAL better?
To be perfectly clear, there’s absolutely nothing wrong with investing in the Vanguard Total Stock Market ETF if you’re looking for a low-cost, set-it-and-forget-it investment vehicle that is likely to deliver strong performance over long periods of time.
Having said that, my biggest problem with it is that it’s a weighted index fund (meaning that larger companies make up a proportionally larger share of its holdings), and the stock market has become increasingly top-heavy in recent years. For example, even though there are 3,555 stocks in the Total Stock Market ETF, more than 6% of its assets are invested in Microsoft (NASDAQ: MSFT) alone.
In fact, the fund’s top 42 stock holdings account for half of the invested assets. Think of it this way. This “Total Stock Market ETF” has just as much money invested in the 42 largest companies as it does in the remaining 3,513 combined.
In a nutshell, I don’t necessarily love that a passive index fund is so dependent on the performances of relatively few companies. The equal-weight ETF might not include the smallest companies in the market, but it provides broad exposure to the stock market without being too reliant for its returns on any single company.
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Matt Frankel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, and Vanguard Total Stock Market ETF. The Motley Fool recommends Lumentum and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
