{"id":565,"date":"2022-03-09T10:14:58","date_gmt":"2022-03-09T10:14:58","guid":{"rendered":"https:\/\/investorimpactlab.com\/?p=565"},"modified":"2022-03-14T22:02:38","modified_gmt":"2022-03-14T22:02:38","slug":"itot-vs-vti","status":"publish","type":"post","link":"https:\/\/investorimpactlab.com\/itot-vs-vti\/","title":{"rendered":"ITOT vs. VTI – Which US Stock Market ETF To Choose?"},"content":{"rendered":"\n
A long-term investment needs low-cost portfolio constructions<\/strong>. BlackRock<\/a> and Vanguard<\/a> are really good at providing such funds. Both issuers are known for offering low-cost and high coverage ETFs to investors<\/strong>.<\/p>\n\n\n\n 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.<\/p>\n\n\n\n However, there are two ETFs from these issuers. iShares Core S&P Total U.S. Stock Market ETF (ITOT) from BlackRock<\/strong> and Vanguard Total Stock Market ETF (VTI) from Vanguard<\/strong>. I have seen most investors struggling to choose between these two because of their identical structure. <\/p>\n\n\n\n So, I thought, why not compare both ETFs and see which one is a better fit for your portfolio construction.<\/p>\n\n\n\n Therefore, let’s get straight to the differences and similarities between these two ETFs without wasting any time.<\/p>\n\n\n\n The best-known ETF from Vanguard is the Total Stock Market Fund<\/strong><\/a>. It was one of the first index funds I ever invested in. There are several competing funds that seek to achieve comparable results.<\/p>\n\n\n\n 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?<\/p>\n\n\n\n ITOT and VTI aim for broader market-cap coverage by tracking the S&P Total Market Index<\/strong>. It includes all stocks of large-, mid-, and small-cap companies incorporated in the US<\/strong>. ITOT has almost 3,600 stocks at a market correlation, whereas VTI has above 4000.<\/p>\n\n\n\n The distinction between VTI and ITOT is that VTI holds around 400 more securities than ITOT. This implies that VTI has a “long tail<\/strong>” of the tiny-cap equity market that is absent from ITOT.<\/p>\n\n\n\n The minimum market cap for the VTI index is $15 million<\/strong>, whereas ITOT requires no such amount. The two funds are not identical, but still, their compositions are not exactly similar.<\/p>\n\n\n\n iShares Core S&P Total US Stock Market ETF (ITOT)<\/strong> and Vanguard Total Stock Market ETF (VTI)<\/strong> offer a diversified approach towards investments in the US stock market. Both ETFs hold above 3,000 stocks<\/strong> and repurchase the holding stocks on a daily basis. <\/p>\n\n\n\n Moreover, according to past performance, VTI is one of the top-rated ETFs that follows the US total market index<\/strong>. This provides <\/strong>liquidity<\/strong><\/a> without any cost involved.<\/strong> Otherwise, you will have to pay some expense ratios if you want this benefit with mutual funds.<\/p>\n\n\n\n Moreover, the below-given sections will let you know much better about the compositional differences.<\/p>\n\n\n\n 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<\/strong>, and both have negative return percentages with a marginal difference of just 0.5%<\/strong>.<\/p>\n\n\n\n Moreover, the significant differences are in terms of the net assets, the number of holdings, and the index they follow<\/em><\/strong>.<\/p>\n\n\n\n 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<\/strong>.<\/p>\n\n\n\n If I talk about ITOT and VTI, they both provide excellent numbers of holdings. VTI is taking the lead with 4,099 holdings<\/strong> which consist of small, mid, and large-cap companies<\/strong>. This makes it slightly more diversified than ITOT, which holds 3646 holdings<\/strong>.<\/p>\n\n\n\n In terms of allocations, both ITOT and VTI have a stable approach. Both allocate the maximum investment in the Technology sector<\/strong> – ITOT invests 25.48%<\/strong>, and VTI invests 25.52%<\/strong>. After that, the next big sector of allocations of ITOT and VTI is Financial Services<\/strong> with 14.01%<\/strong> and 13.70%<\/strong>, respectively.<\/p>\n\n\n\n Next is Healthcare <\/strong>with 13.02% <\/strong>of ITOT and 13.09% <\/strong>of VTI, Consumer Cyclical <\/strong>with 11.96% <\/strong>and 11.64%<\/strong> respectively. The fifth among the top 5 is Communication Services<\/strong>, with 8.86%<\/strong> of ITOT and 9.20% <\/strong>for VTI.<\/p>\n\n\n\n In terms of sector allocations, you can consider both of them equally suitable for investing in the US stock market ETFs.<\/p>\n\n\n\n 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.<\/p>\n\n\n\n The past performance of both ITOT and VTI is awe-inspiring. ITOT has a five-year average return of 17.34%<\/strong>, whereas VTI has an impressive 17.90%<\/strong>. It indicates that you can get better returns with VTI than ITOT in the long term<\/strong>.<\/p>\n\n\n\n The dividend yield is an income return on investment.<\/em><\/p>\n\n\n\n VTI provides a greater dividend yield of 1.26%,<\/strong> whereas ITOT offers only 1.20%<\/strong>, making VTI more suitable for dividends. Moreover, it has higher exposure to mid-cap companies than ITOT<\/strong>, which are the best-performing stocks in terms of back-end loaded dividends.<\/p>\n\n\n\n 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% <\/strong>and 18.32%, <\/strong>respectively. It indicates that you can invest in either one without hesitation because the risk is almost the same for both ETFs.<\/p>\n\n\n\n The current volatility of VTI is 25.08%<\/strong>, which is roughly comparable to the ITOT’s volatility of 25.23%<\/strong>.<\/p>\n\n\n\n The difference between the volatility of VTI and ITOT is almost negligible. Therefore, you can choose either one for investing in.<\/p>\n\n\n\nKey Takeaways<\/h2>\n\n\n\n
ITOT vs VTI – What Are the Differences?<\/h2>\n\n\n\n
ITOT vs VTI – Composition<\/h2>\n\n\n\n
ITOT – Composition<\/h3>\n\n\n\n
Issuer<\/strong><\/td> iShares<\/td><\/tr> Date of Inception<\/strong><\/td> Jan 20, 2004<\/td><\/tr> Year to Date Return<\/strong><\/td> -7.95%<\/td><\/tr> Category<\/strong><\/td> Large Cap Growth Equities<\/td><\/tr> Underlying Index<\/strong><\/td> S&P Total Market Index<\/td><\/tr> Net Assets<\/strong><\/td> $46.71B<\/td><\/tr> Expense Ratio<\/strong><\/td> 0.03%<\/td><\/tr> Dividend Yield<\/strong><\/td> 1.20%<\/td><\/tr> Number of Holdings<\/strong><\/td> 3,646<\/td><\/tr> Top 10 Holdings %<\/strong><\/td> 23.77%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n VTI – Composition<\/h3>\n\n\n\n
Issuer<\/strong><\/td> Vanguard<\/td><\/tr> Date of Inception<\/strong><\/td> May 24, 2001<\/td><\/tr> Year to Date Return<\/strong><\/td> -8.00%<\/td><\/tr> Category<\/strong><\/td> Large Cap Growth Equities<\/td><\/tr> Underlying Index<\/strong><\/td> CRSP U.S. Total Market<\/td><\/tr> Net Assets<\/strong><\/td> $1.26T<\/td><\/tr> Expense Ratio<\/strong><\/td> 0.03%<\/td><\/tr> Dividend Yield<\/strong><\/td> 1.26%<\/td><\/tr> Number of Holdings<\/strong><\/td> 4,099<\/td><\/tr> Top 10 Holdings %<\/strong><\/td> 24.02%<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n Holdings<\/h3>\n\n\n\n
Allocations<\/h3>\n\n\n\n
ITOT vs VTI – Historical Performance of These Two US Stock Market ETFs<\/h2>\n\n\n\n
Returns<\/h3>\n\n\n\n
Dividend yield<\/h3>\n\n\n\n
Risk<\/h3>\n\n\n\n
Volatility<\/h3>\n\n\n\n
ITOT vs VTI – Environment, Social and Governance Ratings (ESG)<\/h2>\n\n\n\n