The top three sectors in this fund are Technology (21.4% of assets); Financial Services (15.66%); and Healthcare (14.89%).
Vanguard Total Stock Mkt Idx Inv (VTSMX)
From The No-Load Fund Investor
While Federal Reserve policy is potentially a strong negative for 2019, attractive valuations may
partially counteract it. The December market debacle has led to many stocks being priced at levels unseen in several years, when their earnings were much lower. This suggests that significant investment opportunities exist today for investors willing to take on some risk.
At the end of November, the price/earnings ratio (P/E) of Vanguard Total Stock Mkt Idx Inv (VTSMX) was 18.7, based on trailing earnings for the past 12 months, according to Vanguard. Given the nearly 10% fall in the fund in December, the P/E on trailing earnings now must be close to 17.
If earnings increase by even 10% in 2019—about half the rate of 2018—the P/E falls to about 15.5 at current prices. With the 10-year Treasury note at 2.7% and core inflation of about 2.2%, a market P/E in the mid-teens is attractive.
Because of Fed policy, I believe the next few months are likely to be rocky. However, if the Fed continues to temper its expectations of future rate hikes, the market is likely to regain its footing. In fact, given currently attractive valuations, it is possible the market will product an above-average result, especially once we get past the winter months. So, though we would not bail on stocks at this point, we would hold some money in reserve in case stocks get cheaper and we can buy in at even lower prices than today.
Mark Salzinger, The No-Load Fund Investor, 800-706-6364, www.noloadfundinvestor.com, January 2019