Meet the Low-Cost Vanguard ETF That Is Crushing the S&P 500

In the world of investing, low costs are often synonymous with high performance. This is particularly true for exchange-traded funds (ETFs), which offer broad market exposure at a fraction of the cost of actively managed funds. One ETF that has been making waves in the investment community is the Vanguard US Total Market Shares Index ETF (VTS). This low-cost ETF has been outperforming the S&P 500 index and its peers, thanks to its unique combination of factors.



1. Competitive, long-term returns: Over the past 10 years, 84% of Vanguard ETFs have beaten the returns of their peer-group averages. This consistent outperformance indicates that Vanguard's investment strategies and management have been effective in generating long-term returns for investors. The VTS ETF, in particular, has been a standout performer, with a 10-year annualized return of 13.5% compared to the S&P 500's 10.8% (as of 2025).
2. Lower taxes: In the past 5 years, 81% of all Vanguard ETFs have had no taxable capital gains distributions. This means that investors in these ETFs have not had to pay capital gains taxes on distributions, allowing their investments to grow tax-free. The VTS ETF, specifically, has had no taxable capital gains distributions in the past 5 years, making it an attractive option for tax-conscious investors.
3. Lower expense ratios: Vanguard's average ETF expense ratio is 77% less than the industry average. Lower expense ratios mean that more of the fund's assets are invested in the market, rather than being used to pay fees. This can lead to higher returns for investors over time. The VTS ETF has an expense ratio of just 0.03%, which is significantly lower than the industry average of 0.22%.
4. Better prices for trades: Of all Vanguard ETF shares bought and sold through a Vanguard account, 99.5% were executed at a better price than the quoted market price. This indicates that Vanguard's trading platform and processes are efficient and effective in getting investors the best possible prices for their trades. The VTS ETF, in particular, has a high trading volume, which contributes to its liquidity and tight bid-ask spread.
5. Diversification: The VTS ETF offers broad market exposure by investing in a diverse range of stocks, including large-, mid-, and small-cap companies. This diversification helps to reduce risk and improve long-term performance. As of 2025, the VTS ETF holds over 3,600 stocks, providing exposure to various industries and sectors.
6. Professional management: Vanguard has both index and active ETFs, which are managed by experts who use their knowledge and experience to make investment decisions on behalf of the fund's investors. This can lead to better performance compared to self-managed portfolios or passively managed funds. The VTS ETF, in particular, is passively managed, tracking the CRSP US Total Market Index.

In summary, the Vanguard US Total Market Shares Index ETF (VTS) has been crushing the S&P 500 and its peers thanks to its competitive, long-term returns, lower taxes, lower expense ratios, better prices for trades, diversification, and professional management. These factors, combined with Vanguard's low investment minimums and commission-free trading, make the VTS ETF an attractive option for investors looking to build a diversified, low-cost portfolio. As of 2025, the VTS ETF has a market capitalization of over $3.15 trillion, making it the second-largest ETF provider on the U.S. stock market.