The Biggest Drawback of Vanguard Total World

September 13, 2020 vanguard vtwax vt [investing]

There is a lot of discussion online about the Vanguard Total World Stock Fund which is sold both as a mutual fund and a ETF. The debate is often about its allocation to International funds and how that drags down the total return. As if no other country in the world produces anything.

However for me, the biggest debate is the fund is cap-weighted and so always more in the largest companies which are often very expensive. For example, its largest holdings today are Amazon, Apple, and Microsoft - all of which immensely high PE ratios of 115, 33, and 35. There isn’t much capture of cheaper stocks and the fund turns out to be a kind of growth large-cap fund.