Vanguard Total Stock Market ETF trades at a trailing P/E of 26.3, 36% below its five-year average of 41.1. Its earnings yield of 3.8% trails the 10-year U.S. Treasury yield of 4.6%, implying a negative 0.8% risk premium despite a forward P/E of 19.6.
The ETF’s trailing price-to-earnings ratio stands at 26.3, a 36% drop from its five-year average of 41.1. This valuation decline suggests investors are paying less per dollar of earnings than in the recent past, potentially indicating a buying opportunity if fundamentals hold.
The forward P/E of 19.6 reflects an anticipated 13% earnings increase over the next year. Growth projections are anchored by the fund’s largest positions—Nvidia at 6.6%, Apple at 5.7% and Microsoft at 4.4%—whose combined earnings rose roughly 50% year-over-year.
With an aggregate earnings yield of 3.8% versus a 4.6% yield on the 10-year U.S. Treasury, the ETF currently offers a negative 0.8% risk premium. This means investors accept lower compensation for equity risk than they would by holding government bonds.
Long-term investors must weigh the ETF’s broad exposure and lower valuation against the opportunity cost of a negative risk premium. A selective strategy focusing on quality names could mitigate downside if expected earnings growth fails to materialize, making forward P/E trends critical to monitor.
