**Episode #568: Examining Why Astute Investors Are Reevaluating the ‘VTSAX and Chill’ Approach**
For many years, the term “VTSAX and chill” has served as a rallying point for passive investors advocating for simplicity and long-term wealth accumulation. VTSAX, or the Vanguard Total Stock Market Index Fund Admiral Shares, has garnered a dedicated following within the financial independence and early retirement (FIRE) community. Its allure? Extensive market diversification, minimal fees, and the capacity to accumulate wealth without the necessity of selecting individual stocks or worrying about market timing. Combined with the hands-off methodology that the “set it and forget it” tactic endorses, it is clear why VTSAX has been regarded as one of the essential instruments for achieving financial independence.
Nevertheless, in a rapidly evolving economic landscape and shifting investment dynamics, some savvy investors are starting to reassess the dominance of the “VTSAX and chill” method. Episode #568 of our financial podcast investigates the motivations behind this reevaluation and discusses whether it’s time for investors to explore modifications or alternatives to this once-unassailable strategy.
—
### The Emergence of VTSAX: A Quick Overview
Before we explore what has changed, it’s beneficial to consider what contributed to VTSAX’s status as a cultural sensation among personal finance aficionados. VTSAX is an index fund that effectively mirrors the performance of the entire U.S. stock market—large-cap, mid-cap, and small-cap stocks—comprising thousands of publicly traded entities. Managed by Vanguard and featuring an expense ratio of merely 0.04%, its cost-effectiveness and strong connection to overall market performance make it an obvious choice for investors seeking sustained growth.
Combined with a passive investing philosophy championed by Jack Bogle (the pioneer of index investing) and praised in influential books like “The Simple Path to Wealth” by JL Collins, the “VTSAX and chill” approach gained traction as a remedy to the pressures and complexities of active trading. Investors found comfort in knowing they did not need to outsmart the market to prosper—they could simply benefit from the long-term growth of American businesses.
—
### What’s Fueling the Reevaluation?
So, if VTSAX is so appealing, why are investors reconsidering its position as the foundation of their portfolios? Let’s investigate the primary reasons driving this shift:
#### 1. **Dependence on U.S. Markets**
VTSAX is entirely centered around the U.S. stock market, which indicates that investors are fully dependent on the prosperity and stability of the U.S. economy. While the U.S. has long been a global economic leader, emerging trends suggest that other areas, such as Asia and developing nations, are set for notable growth in the coming years. Some analysts express concern that a heavily U.S.-focused strategy could expose investors to significant risks, particularly if international diversification is disregarded.
What could occur if the U.S. undergoes a lengthy economic slump or loses some of its competitive advantage? This concern has led many investors to seek international exposure through options like the Vanguard Total International Stock Index Fund (VTIAX) or ETFs such as VXUS.
#### 2. **Increasing Sector Concentration**
With mega-cap technology stocks continuing to dominate the U.S. stock market, some critics argue that VTSAX’s extensive diversification is becoming less effective. A limited number of companies—including Apple, Microsoft, Amazon, and Alphabet—constitute an outsized share of the total market capitalization, wielding significant influence over the index’s performance. While this has been advantageous during the tech sector’s remarkable ascent, it simultaneously exposes passive investors to sector vulnerabilities, including regulatory actions or a prolonged tech downturn.
Investors adhering to a “VTSAX and chill” strategy may not entirely grasp how reliant their portfolios are on the success of a few tech giants.
#### 3. **Economic and Market Cycle Shifts**
The stock market has seen an extraordinary growth streak following the 2008 financial crisis, driven by exceptionally low interest rates, quantitative easing, and various accommodating monetary policies. However, recent inflationary pressures and rising interest rates have begun to challenge stock market returns, igniting concerns about recession possibilities.
Since VTSAX reflects the total stock market, its performance is directly linked to market conditions. Consequently, astute investors are seeking ways to reinforce their portfolios with alternative assets such as bonds, real estate investment trusts (REITs), or commodities—areas that a straightforward VTSAX strategy may overlook.
#### 4. **Greater Access to Alternatives**
The emergence of innovative investment platforms and products has granted retail investors unmatched access to alternative assets that were once typically reserved for institutions or wealthy individuals. From fractional real estate investments to venture capital funds, today’s investors are no longer limited