Buying a Total Stock Market ETF seems like a no-brainer, it’s easy and simple. You are not taking any bets on market size, you just buy it all.

Unfortunately, this is not really a good strategy

It’s actually a poor strategy and you could be missing future performance by excluding the performance impact that MidCap and SmallCap stocks could have on your portfolio.

Total Stock Market ETFs (ex: VTI) are strongly influenced by the performance of LargeCap and this is by design. The portfolio structure of those Funds will seriously dilute the performance of MidCap and SmallCap stocks, hence impacting your portfolio long term.

And if you added VOO or some other S&P 500 ETFs on top of a Total Stock Market ETF in your portfolio, you are doubling your exposure to the S&P 500, meaning your portfolio will follow the market performance of the S&P 500 and forget everything else.

Instead, as an investor looking to capture all the returns of the total market, you should breakdown your total market exposure into 3 market size ETFs with LargeCap S&P 500 ETFs (ex: VOO), MidCap ETFs (ex: VO) and SmallCap ETFs (ex: VB). This will give the exposure MidCap and SmallCap stocks deserve in your portfolio.

By investing equally in these 3 market size ETFs, you will capture the outperformance of market size when they happen.

Without market timing or taking bets on market size. It’s really a no-brainer and a safe balance for a Total Stock Market strategy in your portfolio.

If you are starting your investor journey and need a balanced portfolio of ETFs, build your own here.​