Avantis Total Equity Markets ETF (AVTM)

The Avantis Total Equity Markets ETF (AVTM) represents a modern answer to a classic investor dilemma: should I own just the largest companies, or should I chase the historical outperformance of smaller and cheaper stocks? Instead of choosing, AVTM owns all of them, from the largest blue chips down to smaller companies outside the S&P 500, and then applies a value-factor tilt to overweight the cheaper entries at every size.

Why own the entire market instead of the winners

Most investors who buy index funds end up concentrated in the largest companies. A standard market-weighted fund mirrors the dominance of mega-cap technology and financial firms, which is sensible — they are the bulk of U.S. equity value. But that leaves an investor vulnerable to the next crash in tech stocks and blind to opportunities elsewhere in the market. AVTM starts by capturing the entire investable U.S. equity universe: all the companies in the S&P 500, the mid-cap Russell Midcap Index, and the broader Russell 2000 small-cap complex.

This total-market approach solves an old indexing puzzle. Many index funds choose between broad and narrow universes, but rarely both at once. AVTM holds thousands of stocks, each weighted according to its market capitalization but filtered through a value lens. A large company and a small company are both in the portfolio, but the large company carries more weight because it is larger. The value tilt then nudges the portfolio toward cheaper companies within each size category.

The benefit is exposure to the entire growth of the U.S. economy without betting that today’s winners will still be tomorrow’s. The cost is that a fund holding tiny companies alongside Microsoft inevitably moves with the broad market, and small-company swings can outpace the benefits of size diversification in any single year.

How the value tilt works across company sizes

American Century’s portfolio construction for AVTM applies a consistent filter: stocks are favored if they trade at low valuations relative to their fundamentals — low price-to-earnings, price-to-book, or price-to-sales multiples. This screening happens across all sizes. Large-cap value stocks trade their cheapness differently than small caps (blue-chip banks might trade at 0.8 times book value, while a small industrial trades at 0.5 times book), but the principle is identical: AVTM seeks the undervalued at every tier.

Historically, value stocks — and small-cap value stocks in particular — have delivered stronger long-term returns than growth stocks, though the outperformance has been inconsistent and sometimes disappeared for years at a time. By blending value across all sizes, AVTM aims to capture that premium without betting exclusively on small or mid-cap value alone.

Holdings and portfolio depth

AVTM holds more than 2,500 stocks. The portfolio spans every sector of the economy and every state where public companies operate. On any given day, the top 10 holdings might represent less than 15% of the fund’s value, a sign of genuine diversification. That breadth means no single company failure significantly impacts returns, but it also means AVTM moves with the overall market rather than carving out an independent path.

The fund rebalances quarterly to maintain its value characteristics. As stocks appreciate and grow more expensive relative to their earnings, they are trimmed. As stocks falter and become cheaper, their positions are increased. This mechanical rebalancing is disciplined and unemotional, though it does mean the fund will be selling the recent winners and buying the recent losers — a contrarian stance that works well in mean-reverting markets but less well if one side of the market truly separates from the other for years.

Costs and daily practicalities

The expense ratio is around 0.20% per year, covering the screening, rebalancing, and overhead of a quantitative fund managing thousands of positions. This is well below the cost of a typical active manager but slightly above the cheapest passive total-market index funds, a fair premium for the value-tilt overlay. The fund trades with reasonable volume and liquidity on NASDAQ, and shares can be bought or sold at transparent market prices throughout the trading day.

Owning all of America’s public companies means AVTM captures the full dividend flows across the market. The fund is moderately tax-efficient, though it is not as optimized for taxes as some passive funds that deliberately suppress turnover to avoid triggering capital gains.

Who benefits and the real risks

AVTM appeals to long-term investors who want the simplicity of owning the entire U.S. equity market but believe value is underappreciated and deserve a tilt in their favour. It suits accounts without strong convictions about which companies or sectors will outperform, and it provides a disciplined rebalancing discipline that buys weakness and sells strength automatically.

The primary risk is factor timing — if growth stocks keep outpacing value stocks, AVTM’s value tilt will drag on returns. The fund’s small-cap holdings also carry the natural volatility that comes with smaller companies. And because AVTM holds thousands of positions, its movements are largely synonymous with the overall U.S. stock market; it does not provide meaningful downside protection or independence from broader market swings.

Researching the fund

Start with the prospectus and quarterly fact sheet on American Century’s site. Track the fund’s value factor metrics — average price-to-earnings, price-to-book, and price-to-sales across the portfolio — to understand how deep its value tilt currently runs. Compare performance against the Russell 3000 (a true total U.S. market benchmark) and against other all-cap value funds to see whether the factor overlay is earning its fee. A simple quarterly check of sector weights and the fund’s largest holdings reveals whether the portfolio has drifted and whether it still aligns with your expectations for a total-market holding.