Learn More About Vanguard Total Stock Market Index (VTSMX)

If you're considering adding Vanguard Total Stock Market Index to your investment portfolio, here is some basic information about this mutual fund to help you determine whether it is well suited to helping you accomplish your investment goals.

DESCRIPTION

Here is a description of the fund, from the Vanguard Total Stock Market Index prospectus:

The Fund employs a "passive management"--or indexing--investment approach designed to track the performance of the Morgan Stanley Capital International (MSCI/(R)/) US Broad Market Index, which represents 99.5% or more of the total market capitalization of all the U.S. common stocks regularly traded on the New York Stock Exchange and the NASDAQ over-the-counter market. The Fund typically holds 1,200-1,300 of the stocks in its target index (covering nearly 95% of the Index's total market capitalization) and a representative sample of the remaining stocks.

EXPENSE RATIO

One of the most important details about any mutual fund is its expense ratio. The expense ratio tells investors how much of their investment will be lost (annually) to things like management fees and money spent to advertise and promote the mutual fund.

Obviously, the lower the expense ratio, the better.

According to 2008 Investment News data, the average expense ratio for an actively managed mutual fund (meaning the fund manager actively trades the assets in the fund's portfolio) was about 1.25%.

However, some passively managed mutual funds -- for instance, those that attempt to mirror an index, and whose assets are not traded frequently -- have expense ratios as low as about 0.15%.

The expense ratio for Vanguard Total Stock Market Index is 0.16%. That's 87% less than the average actively managed mutual fund.

TOP HOLDINGS

Here are the top holdings in Vanguard Total Stock Market Index:

• EXXON MOBIL CP (4.08%)
• AT&T INC. (1.75%)
• MICROSOFT CORPORATION (1.73%)
• JOHNSON AND JOHNS DC (1.72%)
• PROCTER GAMBLE CO (1.63%)

HOW THE FUND HAS PERFORMED

Although a mutual fund's past returns do not guarantee future performance, knowing how a fund has fared recently (especially when compared with similar funds) is important information every investor ought to consider when deciding whether to add the fund to his or her portfolio.

In the past year (09/08/2008 - 09/08/2009), Vanguard Total Stock Market Index has gained 12.57%.

In comparison, during the same period, the Standard & Poor's 500 index has gained 11.03%.

ANALYSIS

Is Vanguard Total Stock Market Index right for your investment portfolio?

That depends on your investment goals.

Morningstar, the investment research firm, classifies Vanguard Total Stock Market Index as a "Large Blend" mutual fund. Here is Morningstar's description of Large Blend funds:

Large-blend funds have portfolios that are fairly representative of the overall stock market in both size, growth rates, and price. They tend to invest across the spectrum of U.S. industries and owing to their broad exposure, the funds returns are often similar to those of the S&P 500 Index.

Thus, if you're looking for a mutual fund that offers the stability of large, established companies and the wide exposure of a fund that holds both value and growth stocks, Vanguard Total Stock Market Index might be right for you.

DISCLAIMER

The information contained in this overview of Vanguard Total Stock Market Index is for information purposes only. It does not constitute, nor should it be interpreted as, legal, financial, or other advice. The mutual fund described above is not being recommended or endorsed, nor is this article making any projections or guarantees about the future returns of the fund or the suitability of any particular investment, security or investment strategy.

If you would like professional advice about mutual fund investment, please contact an independent financial adviser.