Want to invest in US shares? This ETF is a top option

Here's why I think the Vanguard US Total Market Shares Index ETF (ASX: VTS) is the pick of the bunch when it comes to US shares ETFs.

| More on:
US shares and ETFs represented by overlapping australian and US currencies

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Investing in United States-listed shares is something that more and more Aussie investors want to do. Whilst our own S&P/ASX 200 Index (ASX: XJO) is a top place to invest your money, there are simply companies over in the US that are a cut above our banks and miners. The two largest companies on the ASX 200 are CSL Limited (ASX: CSL) and Commonwealth Bank of Australia (ASX: CBA). These are both proud companies with long and prosperous histories (both used to be government-owned businesses, coincidentally).

But they pale in comparison with the two largest companies in the US – Apple Inc. (NASDAQ: AAPL) and Microsoft Corporation (NASDAQ: MSFT). The US simply has a far larger range of global companies than the ASX, and also a far larger capital base. There's a reason our home-grown Atlassian Corporation (NASDAQ: TEAM) isn't Atlassian Limited. It's because it lists on the Nasdaq, rather than the ASX.

SPY vs SPY

So, if you want to invest in the US, what are your options? US focused exchange-traded funds (ETFs) are a great place to start. These funds hold baskets of US shares and are normally very cheap, even compared with our own ASX ETFs.

By far, the most popular US index is the S&P 500 Index (SP: .INX). This index holds 500 companies (shocker) that are selected on a range of factors including liquidity, size and profitability. You can invest in this index on the ASX through the iShares S&P 500 ETF (ASX: IVV), which charges a management fee of 0.04% per annum.

You could also try the BetaShares Nasdaq 100 ETF (ASX: NDQ). Rather than tracking the 500 largest companies, NDQ instead only holds 100 of the largest companies listed on the tech-heavy Nasdaq by aiming to track the NASDAQ-100 (NASDAQ: NDX). As such, this ETF has a far heavier focus on tech stocks, which some investors might like. But it also charges a higher management fee of 0.48% per annum.

The best US shares ETF?

My personal favourite US ETF is the Vanguard US Total Market Shares Index ETF (ASX: VTS). Unlike the S&P 500, this ETF holds more than 3,500 US companies, which means it has more exposure to the smaller side of the market. It also holds the shares that don't make the cut for the S&P 500, including the popular electric car maker Tesla Inc (NASDAQ: TSLA). VTS is marginally cheaper than IVV as well, charging a paltry 0.03% management fee per annum.

Foolish takeaway

Whilst I think any of these US-based ETFs would make a good choice for an Aussie investor, VTS is my favourite pick of the bunch with NDQ a close second. Low fees, exposure to some of the best companies in the world, and massive diversification, all in one fund. What more could you want? 

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon, Apple, Atlassian, Microsoft, and Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of BETANASDAQ ETF UNITS and CSL Ltd and recommends the following options: long January 2021 $85 calls on Microsoft, short January 2021 $115 calls on Microsoft, short January 2022 $1940 calls on Amazon, and long January 2022 $1920 calls on Amazon. The Motley Fool Australia has recommended Amazon, Apple, and BETANASDAQ ETF UNITS. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Share Fallers

Why Cromwell Property, Metcash, Pilbara Minerals, and Tyro shares are falling today

Let's see why these shares are under pressure on Tuesday.

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Share Gainers

Why DroneShield, Hansen, Hub24, and Paladin Energy shares are racing higher today

These shares are having a strong session. Let's find out why.

Read more »

A man in a dark blue suit walks through an airport past floor-to-ceiling windows with a Qantas plane flying in the distance
Travel Shares

Up 16% this year, does Macquarie rate Corporate Travel Management shares a buy, hold or sell?

Does the travel stock have further to fly?

Read more »

Business women working from home with stock market chart showing per cent change on her laptop screen.
Opinions

1 month until ASX earnings season begins: how I'm preparing

It’s almost reporting time. Here’s what I’m looking at.

Read more »

Smiling man with phone in wheelchair watching stocks and trends on computer
Share Market News

5 things to watch on the ASX 200 on Tuesday

A good session is expected for Aussie investors today.

Read more »

a man sits at his desk wearing a business shirt and tie and has a hearty laugh at something on his mobile phone.
Opinions

Potential buys: 2 compelling ASX shares I like

These ASX shares have an exciting future.

Read more »

Man on a laptop thinking.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors weren't in a good mood this Monday.

Read more »

A male investor sits at his desk looking at his laptop screen holding his hand to his chin pondering whether to buy Macquarie shares
Share Market News

How I'm preparing my ASX earnings season watchlist

It's almost that time of year again.

Read more »