Could Buying VTI Today Set You Up for Life?

Investing is about growing your money over time. Yes, hitting on the "next big thing" or being in the right place at the right time for a generational gain is life-changing, but it's far from the norm and shouldn't be the expectation.

One of the best ways to set yourself up for life is to invest in the entire U.S. stock market at once and trust its long-term growth. And luckily, it can be done with a single ETF: the Vanguard Total Stock Market ETF (NYSEMKT: VTI). It has been one of the more surefire ways to build wealth over time, and that trend should continue.

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VTI can provide the best of both worlds

Popular stock market indexes like the S&P 500 (SNPINDEX: ^GSPC) and Dow Jones Industrial Average (DJINDICES: ^DJI) only include large-cap companies, though there are thousands of smaller companies trading on the market. There are small-cap and mid-cap-specific indexes, but sometimes it's easier to just invest in a one-stop shop that includes them all. That's the convenience you get with VTI.

VTI contains companies of all sizes, across all industries, but since it gives more weight to larger companies, its top holdings account for a decent amount of the fund:

• Nvidia: 6.70%
  
• Apple: 6.30%
  
• Microsoft: 4.60%
  
• Amazon: 3.60%
  
• Alphabet (Class A): 3.05%
  
• Broadcom: 2.91%
  
• Alphabet (Class C): 2.39%
  
• Meta Platforms: 1.90%
  
• Tesla: 1.69%
  
• Micron: 1.50%

Ten holdings, accounting for over a third of a 3,484-stock ETF, won't be in the dictionary next to diversification, but their makeup is similar to that of the S&P 500. And with VTI, you get exposure to many of the companies that have been driving a lot of the stock market's gains in recent years, as well as exposure to smaller companies that thrive in various economic conditions.

Small-cap stocks, for example, are known to outperform in the early stages of economic recovery, and mid-cap stocks can be a good middle ground as the economy nears a stable period.

The main focus should be on consistency

VTI first began trading on the market in May 2001. Since then, its total returns (which include dividends) have been nearly 900%, averaging about 9.6% annually. That may not be an eye-popping average, but it can be lucrative over time, thanks to the power of compounding.

Using those same returns and accounting for VTI's very cheap 0.03% expense ratio, here is roughly how much different monthly investments could grow to in 25 years:

Author calculations. Investment totals rounded down to the nearest hundred.

Past performance doesn't guarantee future performance, so take these numbers with a grain of salt. More than anything, it's about pointing out how the stock market rewards time and consistency.

It won't always be peachy keen along the way, but if you're consistently investing in VTI, you're almost certainly setting yourself up for life.

Stefon Walters has positions in Apple and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Broadcom, Meta Platforms, Micron Technology, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.