The Hidden ETF Strategy Advisors Use for Market Dominance

Forget the latest speculative tech stock or crypto coin being peddled by influencers. The real secret weapon in the portfolios of disciplined, long-term investors is often something far more boring, and infinitely more powerful: the US total stock market ETF.

These funds are the bedrock of modern portfolio construction, designed to give you a piece of the entire American economy with a single click. They aren't about finding the needle in the haystack; they're about buying the whole haystack. Here’s how they work and why they represent one of the most effective strategies for building wealth.

Insights

• Total stock market ETFs offer instant diversification by tracking thousands of US stocks, from mega-cap giants to small, emerging companies.
• Because these funds are weighted by market capitalization, the largest companies like Apple and Microsoft have the biggest impact on performance.
• The expense ratio, or annual fee, is a key factor. The best funds charge almost nothing, which compounds into significant savings over time.
• ETFs offer superior tax efficiency compared to mutual funds because of their structure, which allows them to avoid passing on most capital gains to shareholders.
• These funds are a US-only tool. A truly diversified portfolio requires separate allocations to international stocks and bonds.

What Exactly Is a US Total Stock Market ETF?

A US total stock market ETF is an exchange-traded fund designed to mirror the performance of the entire US stock market. This includes everything from titans like Amazon and NVIDIA down to small-cap companies you've never heard of.

The fund's goal is to replicate the performance of a broad benchmark index, such as the CRSP US Total Market Index or the S&P Total Market Index. By owning shares in one of these ETFs, you effectively own a small slice of thousands of American businesses. It’s the simplest path to capturing the return of the overall market.

As of July 2025, there are over 750 total market ETFs traded in the US, holding a staggering $2.53 trillion in assets under management.

The Strategic Case for Owning the Entire Market

Financial advisors and institutional investors don't use these funds because they're flashy. They use them because they are ruthlessly effective. Their appeal lies in a few powerful advantages.

First is maximum diversification. Owning thousands of stocks across all sectors dramatically reduces the risk of any single company or industry imploding and taking your portfolio with it. Second is the rock-bottom cost. Competition has driven fees down to near zero, meaning more of your money stays invested and working for you. Third is simplicity. It's a one-stop shop for US equity exposure.

Finally, you are guaranteed to capture the market's return. You will never underperform the US stock market, because you *own* the US stock market. This is a simple truth that trips up a surprising number of active managers who try, and fail, to do better.

"The next $10 trillion in ETF assets is going to come from the core — the ‘meat and potatoes’ part of portfolios."

Dave Abner Head of Global ETFs and Funds, Northern Trust

The Heavyweights: A Look at the Top Contenders

While hundreds of these funds exist, the field is dominated by a few low-cost giants. If you're looking at total market ETFs, you'll inevitably run into these three.

Vanguard Total Stock Market ETF (VTI): This is the category king, tracking the CRSP US Total Market Index. With an expense ratio of just 0.03%, it’s incredibly cheap. VTI surpassed $500 billion in AUM as of July 2025, a testament to its popularity. For context on its performance, VTI returned 22.11% in 2024 and 24.05% in 2023.

iShares CORE S&P Total U.S. Stock Market ETF (ITOT): BlackRock's main competitor to VTI, ITOT follows the S&P Total Market Index. It offers similar broad exposure to VTI with the same expense ratio of 0.03%. With over $50 billion in AUM as of July 2025, it's another highly liquid and reliable choice. Its year-to-date total return was 6.96% as of mid-July 2025.

Schwab U.S. Broad Market ETF (SCHB): Known for being the cost leader, SCHB tracks the Dow Jones U.S. Broad Stock Market Index and boasts an almost unbelievable expense ratio of just 0.02%. It offers slightly fewer holdings than VTI but delivers nearly identical performance over the long run.

How to Evaluate These Funds Like a Pro

When you're comparing funds that are so similar, the small details matter. Here is what to focus on.

Expense Ratio: This is the annual fee you pay, expressed as a percentage of your investment. While the average expense ratio for this category is 0.56%, the top funds charge between 0.02% and 0.03%. That difference is enormous over an investing lifetime.

Underlying Index: The indexes from CRSP, S&P, and Dow Jones are mostly the same, but there are minor differences in how they define the market and when they rebalance. For 99% of investors, these differences are academic.

Tracking Difference: This measures how well the ETF actually tracks its stated index. The big players are exceptionally good at this, with tracking differences that are often negligible.

Liquidity and Bid-Ask Spread: Liquidity refers to how easily you can buy or sell the ETF. Funds with high assets and trading volume, like VTI and ITOT, are extremely liquid. This results in a very tight bid-ask spread—the tiny gap between the buying and selling price. For the most liquid ETFs, this spread is typically very narrow, often as low as one cent.

Analysis

The rise of the total stock market ETF isn't just a product trend; it's a fundamental shift in investing philosophy. For decades, the game was about finding a brilliant stock picker who could beat the market. The data is now overwhelmingly clear: most can't, especially after accounting for their fees. The total market ETF is the quiet admission of that failure and the embrace of a more logical strategy.

Why pay 1% or more for a mutual fund that has a high probability of underperforming the market when you can own the entire market for 0.03%? This is the question that has funneled trillions of dollars out of expensive, actively managed mutual funds and into these lean, efficient ETFs. It's a move away from speculation and toward ownership.

This shift is also about control and transparency. With an ETF, you know exactly what you own and what you're paying. There are no hidden fees or style drift from a manager chasing a hot trend. This structure provides a level of discipline that many investors struggle to maintain on their own. It forces you to accept the market's return, for better or worse, which is historically a winning proposition.

"Increasing confidence in the ETF structure globally is pushing ETF usage to new highs at the expense of other, more limited structures. Investors are becoming more aware of the benefits of ETFs versus mutual funds or separately managed accounts (SMAs)."

Eduardo Repetto Chief Investment Officer, Avantis Investors by American Century Investments

Final Thoughts

Total stock market ETFs are powerful building blocks for a portfolio. They solve the US stock portion of your asset allocation with unmatched simplicity and efficiency. However, they are not a complete portfolio on their own.

They do not provide exposure to international stocks or bonds, so additional funds are needed for a properly balanced and globally diversified portfolio. Think of a total market ETF as the strong, concrete foundation of your house. You still need to build the walls and the roof around it with other assets like international funds (like VXUS or IXUS) and bond funds.

In a world obsessed with complexity, the elegant simplicity of owning the entire market is a winning strategy. It's about admitting you can't predict the future and deciding to own it all instead. For most investors, that's the smartest move on the board.

"Building a resilient core to a portfolio with ETFs is the foundation of long-term wealth."

Dave Abner Head of Global ETFs and Funds, Northern Trust

Did You Know?

The US total stock market ETF category holds more than $2.53 trillion in assets as of July 2025. This massive sum highlights how many investors rely on these funds as the core of their investment strategy.