There's One Main Reason Why Investors Have Shied Away From This Spectacular Vanguard ETF. It's Not a Good One.

2026-03-09 12:28:00 ET

With so many exchange-traded funds in the market, it's not surprising to see many investors focus almost exclusively on performance. If an ETF has had an exceptionally good year or two, then the odds of investors getting excited about it grow. Conversely, investors have little patience for poor performers, tending to shy away from them even if they have good future prospects. And if they've already bought a poorly performing ETF, they often sell it at the worst possible moment.

The thing that many investors don't fully understand about ETFs is that in some cases, getting the highest possible potential for returns isn't the primary goal. After all, diversification is generally at odds with immediately maximizing your potential profit, because owning just a single stock or two is much more likely to result in massive returns than owning hundreds or even thousands of stocks. Why diversification is helpful is that it also reduces the odds of a complete loss of capital by spreading your investment capital over many different stocks.

In that light, the Vanguard Total Stock Market ETF (NYSEMKT: VTI) has been extremely popular for giving investors the widest possible exposure to U.S. stocks. To the chagrin of many of its shareholders, though, it hasn't done as well as rival ETFs that focus on narrower market indicators. In this second article of a three-part series on Vanguard Total Stock Market ETF for the Voyager Portfolio , you'll learn more about the details of this underperformance and why long-term investors shouldn't necessarily avoid this Vanguard ETF even though it might seem like it has already lost the fight.

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