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

Hand holding out coal in front of a coal mine.
Broker Notes

Up 379% in 5 years, are Whitehaven Coal shares now a buy, hold or sell?

Here’s what Macquarie is forecasting for Whitehaven Coal shares into 2026.

Read more »

Woman with gold nuggets on her hand.
Broker Notes

Expert tips further upside for this surging ASX 200 gold stock

How much fuel is left in the tank for this gold mining heavyweight?

Read more »

A male sharemarket analyst sits at his desk looking intently at his laptop with two other monitors next to him showing stock price movements
Share Market News

5 things to watch on the ASX 200 on Tuesday

It looks set to be a tough session for Aussie investors.

Read more »

happy solar panel installers, solar energy
Share Market News

How Wesfarmers shares could benefit from the latest Bunnings product expansion

Bunnings has a growth plan to charge its profit higher.

Read more »

share buyers, investors, happy investors
Opinions

Why it could be a great time to buy AFIC shares

I’m optimistic about the return potential for this investment company.

Read more »

a couple clink champagne glasses on board a private aircraft with gourmet food plates set in front of them. They are wearing designer clothes and looking wealthy.
Opinions

Why I'm aiming for $1 million with ASX shares

I think it makes a lot of sense to invest in stocks to achieve wealth goals.

Read more »

Ten happy friends leaping in the air outdoors.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors started the week off in a good mood today.

Read more »

A cute young girl with curly hair sips a glass of milk through a straw with a smile on her face.
Broker Notes

Up 37% this year, why Macquarie expects A2 Milk shares to keep outperforming

Macquarie remains bullish on A2 Milk shares heading into 2026. Let’s see why.

Read more »