A long-term investment needs low-cost portfolio constructions. BlackRock and Vanguard are really good at providing such funds. Both issuers are known for offering low-cost and high coverage ETFs to investors.
In my years of experience, I cannot remember if I faced any trouble in managing the stocks from these two issuers. And I am sure that it is true for the majority of the investors.
However, there are two ETFs from these issuers. iShares Core S&P Total U.S. Stock Market ETF (ITOT) from BlackRock and Vanguard Total Stock Market ETF (VTI) from Vanguard. I have seen most investors struggling to choose between these two because of their identical structure.
So, I thought, why not compare both ETFs and see which one is a better fit for your portfolio construction.
Therefore, let’s get straight to the differences and similarities between these two ETFs without wasting any time.
Key Takeaways
- ITOT and VTI are both US Stock Market ETFs.
- ITOT is from iShares, and VTI is from Vanguard.
- The market tracked by ITOT is S&P Total Market Index.
- Whereas VTI tracks CRSP US Total Market Index.
- VTI has outperformed ITOT based on the historical performance as it has wider exposure to small and mid-cap stocks.
- Both the ETFs are tax-efficient and can be used for tax-loss harvesting purposes.
ITOT vs VTI – What Are the Differences?
The best-known ETF from Vanguard is the Total Stock Market Fund. It was one of the first index funds I ever invested in. There are several competing funds that seek to achieve comparable results.
The iShares Core S&P Total U.S. Stock Market ETF is one of them, and we’ll talk about it today. But what exactly distinguishes VTI from ITOT, and which one should you choose?
ITOT and VTI aim for broader market-cap coverage by tracking the S&P Total Market Index. It includes all stocks of large-, mid-, and small-cap companies incorporated in the US. ITOT has almost 3,600 stocks at a market correlation, whereas VTI has above 4000.
The distinction between VTI and ITOT is that VTI holds around 400 more securities than ITOT. This implies that VTI has a “long tail” of the tiny-cap equity market that is absent from ITOT.
The minimum market cap for the VTI index is $15 million, whereas ITOT requires no such amount. The two funds are not identical, but still, their compositions are not exactly similar.
ITOT vs VTI – Composition
iShares Core S&P Total US Stock Market ETF (ITOT) and Vanguard Total Stock Market ETF (VTI) offer a diversified approach towards investments in the US stock market. Both ETFs hold above 3,000 stocks and repurchase the holding stocks on a daily basis.
Moreover, according to past performance, VTI is one of the top-rated ETFs that follows the US total market index. This provides liquidity without any cost involved. Otherwise, you will have to pay some expense ratios if you want this benefit with mutual funds.
Moreover, the below-given sections will let you know much better about the compositional differences.
ITOT – Composition
| Issuer | iShares |
| Date of Inception | Jan 20, 2004 |
| Year to Date Return | -7.95% |
| Category | Large Cap Growth Equities |
| Underlying Index | S&P Total Market Index |
| Net Assets | $46.71B |
| Expense Ratio | 0.03% |
| Dividend Yield | 1.20% |
| Number of Holdings | 3,646 |
| Top 10 Holdings % | 23.77% |
VTI – Composition
| Issuer | Vanguard |
| Date of Inception | May 24, 2001 |
| Year to Date Return | -8.00% |
| Category | Large Cap Growth Equities |
| Underlying Index | CRSP U.S. Total Market |
| Net Assets | $1.26T |
| Expense Ratio | 0.03% |
| Dividend Yield | 1.26% |
| Number of Holdings | 4,099 |
| Top 10 Holdings % | 24.02% |
From the above given compositional information, it is apparent that there aren’t any significant differences between these two ETFs. Even the year-to-date returns are almost identical, and both have negative return percentages with a marginal difference of just 0.5%.
Moreover, the significant differences are in terms of the net assets, the number of holdings, and the index they follow.
Holdings
The number of holdings plays a vital role when planning to diversify the portfolio. Holdings provide a broader asset allocation, ensuring better returns, especially long-term ones.
If I talk about ITOT and VTI, they both provide excellent numbers of holdings. VTI is taking the lead with 4,099 holdings which consist of small, mid, and large-cap companies. This makes it slightly more diversified than ITOT, which holds 3646 holdings.
Allocations
In terms of allocations, both ITOT and VTI have a stable approach. Both allocate the maximum investment in the Technology sector – ITOT invests 25.48%, and VTI invests 25.52%. After that, the next big sector of allocations of ITOT and VTI is Financial Services with 14.01% and 13.70%, respectively.
Next is Healthcare with 13.02% of ITOT and 13.09% of VTI, Consumer Cyclical with 11.96% and 11.64% respectively. The fifth among the top 5 is Communication Services, with 8.86% of ITOT and 9.20% for VTI.
In terms of sector allocations, you can consider both of them equally suitable for investing in the US stock market ETFs.
ITOT vs VTI – Historical Performance of These Two US Stock Market ETFs
VTI’s historical performance beats most other funds and ETFs in the US stock market. That’s why it is known as the best Total US stock market fund.
Returns
The past performance of both ITOT and VTI is awe-inspiring. ITOT has a five-year average return of 17.34%, whereas VTI has an impressive 17.90%. It indicates that you can get better returns with VTI than ITOT in the long term.
Dividend yield
The dividend yield is an income return on investment.
VTI provides a greater dividend yield of 1.26%, whereas ITOT offers only 1.20%, making VTI more suitable for dividends. Moreover, it has higher exposure to mid-cap companies than ITOT, which are the best-performing stocks in terms of back-end loaded dividends.
Risk
In terms of risk, both ITOT and VTI have a similar approach. They both provide a low-risk investment option with a standard deviation of 18.35% and 18.32%, respectively. It indicates that you can invest in either one without hesitation because the risk is almost the same for both ETFs.
Volatility
The current volatility of VTI is 25.08%, which is roughly comparable to the ITOT’s volatility of 25.23%.
The difference between the volatility of VTI and ITOT is almost negligible. Therefore, you can choose either one for investing in.
ITOT vs VTI – Environment, Social and Governance Ratings (ESG)
According to the MSCI ESG, registered under the Investment Advisers Act of 1940, the ESG rating plays a pivotal role. ESG ratings ensure the company makes responsible and sustainable business decisions that contribute to the environmental benefit, social equality, and earning quality.
Moreover, the MSCI gives a AAA ESG rating if the company has positive ESG criteria. At the same time, CCC ESG ratings are provided for companies that violate one or more of the mentioned criteria.
Both ITOT and VTI have also been reviewed, and the ratings are provided in the below-given table.
| ITOT (AA) | VTI (AA) | |
| ESG Quality Score | 7.31/10 | 7.30/10 |
| Peer Group Percentile Rank | 34.83 | 33.87 |
| Global Percentile Rank | 56.42 | 56.05 |
| SRI Screening Criteria Exposure | 5.06% | 5.06% |
| Exposure to Sustainable Impact Solutions | – | – |
| Weighted Average Carbon Intensity (t CO2e/$M Sales) | 126.94 | 128.04 |
When buying index fund ETFs, considering every aspect becomes crucial. In the case of ITOT and VTI, both are good options for investing in the US stock market. However, it depends on your choice in the end.
Moreover, VTI is one of the best ETFs for long-term investment. It’s because this index fund performs better than most other mutual funds and ETFs in the US stock market.
Furthermore, if you dig deep enough, you may discover minor variations in VTI and ITOT, albeit none that are significant. Both provide excellent coverage of the entire US stock market at a fraction of the cost to investors. The only distinctions are in the funds’ smallest ETF holdings, which account for only a tiny portion of the overall portfolio’s weighting.
Therefore, my investing advice will be to choose either of them as both have excellent growth potential. Both ITOT and VTI can provide enough portfolio growth.
Final Thoughts
ITOT vs VTI: two of the favorite ETFs among investors. Both ITOT and VTI offer a great way to invest in the US stock market at a meager cost. However, there are differences between these two US stock market ETFs, but most of them are negligible.
Therefore, if you have enough time to dig deep, you may discover minor variations in VTI and ITOT. Also, my tax advice is that both the ETFs have outstanding tax efficiency, which can help you save some extra dollars.
In the end, choosing between these two ETFs is a matter of preference and financial goals when investing. Also, never forget to consult a financial advisor to lay out a trading strategy.