I Put the Majority of My Portfolio Into 2 Vanguard ETFs 3 Years Ago. Here Is What Happened.

Up until a few years ago, my personal portfolio looked a lot like everyone else's. I had money invested in the S&P 500 as the core of my portfolio. But beyond that, it was a mix of style, sector, and factor ETFs without a lot of focus except for the fact that I thought they had a good chance at being outperformers.

There were some hits and misses, but the thing that prevented me from having more success is that I just didn't pay attention to it as much as I should have. In the end, I wasn't really generating any meaningful outperformance and I just owned a portfolio of funds without much structure.

So I decided to instead focus on just two things I could control: simplicity and low costs. The big selling point of index funds was that instead of paying high expense ratios to try to beat the market (and most money managers don't), just buy the index, match its performance, and pay next to nothing for the privilege.

So that's what I did. I put the majority of my portfolio into two ETFs -- the Vanguard Total Stock Market ETF (NYSEMKT: VTI) and the Vanguard Total International Stock ETF (NASDAQ: VXUS). Looking back now over the past three years, I can say that it was one of the best investing decisions I've made.

Image source: Getty Images.

Key takeaways

• VTI recovered nicely from the 2022 bear market, but has lagged the S&P 500 due to its inclusion of mid- and small-caps.
• VXUS has underperformed U.S. stocks for years, but it's enjoyed a big resurgence over the past year and a half.
• The combination of these two ETFs has allowed me to simply participate in the global growth narrative without trying to pick winners at the right time.
• The simplicity of choosing to let the long-term power of compounding do the work for me has simplified my life considerably.

What worked: Low costs and large-cap exposure

The Vanguard Total Stock Market ETF and Vanguard Total International Stock ETF come with expense ratios of 0.03% and 0.05%, respectively. If you stick with Vanguard funds, you can keep costs minimal with most of its broad market and sector ETFs. But some of the more specialized, niche ETFs from other issuers can come with expense ratios of 0.50% or more. The focus on low fees is a factor I can control and it keeps more money in my pocket regardless of performance.

Both of these ETFs are also market cap-weighted. That means heavy exposure to large-caps and minimal to negligible allocations to smaller companies. It's not the textbook definition of diversification, but I was heavily invested in what's worked best over the past three years.

What didn't work: Underweighting tech and international performance drag

The biggest driver of returns over the past three years have been tech and the Magnificent Seven stocks. The Vanguard Total Stock Market ETF is market cap-weighted so it has a heavy presence in these mega-caps but not to the degree of the S&P 500. The Vanguard Total International Stock ETF has just a 15% allocation to tech, so my overall exposure to the sector was underweight what it could have been.

2025 was a very good year for international stock performance, but it was a drag prior to that time. I like the future for overseas equities more than the past, but an S&P 500-only portfolio would have done better.

The long-term case for these ETFs

Data source: Vanguard.

Some of the trade-offs I listed worked in my favor and some didn't. But they were ones that I accepted. Sticking with broad diversification usually means lower highs but it probably means higher lows in down markets. Three years in, I don't plan on changing this approach. It's exactly what this pair of ETFs is built for.

David Dierking has positions in Vanguard Total International Stock ETF and Vanguard Total Stock Market ETF. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.