Vipers Have Bite. (VTI) Packs Serious Punch.

According to Google finance’s entry about (VTI), “Vanguard Total Stock Market ETF (the Fund), formerly known as Vanguard Total Stock Market VIPERs, seeks to track the performance of a benchmark index that measures the investment return of the overall stock market.”

That said, this all assumes you know about ETFs and why they are often a better pick for smaller investors when compared with a mutual fund. But just in case you don’t, there is a great post about VTI that you might want to check out. It does a nice job of highlighting the reasons to look into ETFs, specifically, this nice ETF offered by Vanguard, that has some nice bite.

Getting Personal

This year I started my own Roth IRA to save for retirement, in addition to my 401k at work. This largely because my company doesn’t match so I didn’t want to dump all of my money in there. Also, because I subscribe to the idea that it might be a good idea to “diversify” your tax position when it comes to retirement since your tax situation might actually be better later in life. If all the money is in the same kind of account, there will only be one set of rules that can be followed. Conversely, having different kinds of accounts will likely afford me with a little bit more flexibility later on in retirement in terms of withdrawls, gifts, taxability etc.

Funding my Roth with VTI seemed to be a logical next step. I’ve learned from Bogle, so I wanted to focus on funds with no load. Of course, there is a small transaction fee for ETFs, but I’m not in a position to do regular investing yet.

Instead, I wanted something I could buy and forget about, much like mutual funds in my 401k. So a single stock isn’t a great idea. Instead, to me, ETFs made the most sense because I could buy an indexed ETF to cover a large amount of equities without a minimum investment. However, until I have a decent sum, I didn’t want to buy a specialized ETF. So, I started with the VTI ETF offered by Vanguard. I get the whole stock market, indexed automatically; nothing fancy. That’s it. End of story. And just in one day not long ago, I made about 1%. I like it and it’s easy to follow.

Similar ETFs

Understanding that VTI is a total stock market index ETF gives you the information you need in order to find similar ETFs. Just look for ETFs that are following the major indexes. The following are some of the more common ones. To learn more about them, just do a quick search on any major finance website to get statistics, averages, p/e ratios and fees etc.

DIA - tracks the Dow Jones Industrial Avg
QQQ - tracks the nasdaq 100 trust
SPY - tracks the S&P 500

The nice thing about these indexes is that you generally just watch the market, you don’t have to track or pick a particular stock. As we’ve learned from Bogle, over a long haul (like retirement) this should give us a solid B when it comes to investing, if we rely on historical information. Of course, whenever we invest, we hear the standard disclaimer that “past performance is no indication of future returns”. But I’d still prefer to look at past performance when it comes to indexes, because my feeling is that there is no fund manager to worry about; it’s generally the entire free market that determines how these equities will be priced, not any one person.

So, if you are interested in investing lump-sums on an irregular basis, you might consider doing what I did. Pick an ETF or two that you like and start an account at a discount brokerage firm. Then just throw the money in as you can and leave it alone. You may be very happy when it comes time to retire.

You may also be interested in this previous post on Mutual Funds.