Comparing Total Market ETF’s
Today we’re going to look at two of the most popular TOTAL MARKET ETF’s, ITOT and VTI. I’ll preface by stating I own ITOT in my Traditional IRA account; here’s a prior blog where I talked about it: ITOT ETF
I also own VTSAX (Vanguard’s Total Market mutual fund) in my ROTH, but this post is about ETF’s.
Both Blackrock’s Ishares and Vanguard are names that have been around for a long time. Vanguard’s VTI has been live since 2001, and the ishares ITOT total market ETF began in 2004.
Assets Under Management
From an Assets Under Management perspective, Vanguard’s VTI is larger (283 BILLION) vs. 43 BILLION for ITOT. It turns out VTI is in the top three largest ETF’s. SPY and IVV are the only ones larger.
Expense ratio is one of the first things investors should look at it, as it’s a cost that is passed on to them. Usually with total market ETF’s, expense ratios aren’t too much of a concern. Both Ishares ITOT and Vanguard’s VTI have extremely low expense ratios of 0.03%.
NUMBER OF HOLDINGS
VTI has over 4000 holdings, while ITOT has 3660. If your idea of better is more holdings, then VTI is clearly the winner. You are getting a wee bit more of Apple and Microsoft. At the same time, maybe some of its holdings aren’t additional ones you need or want? That’s something you have to decide with your own personal portfolio. For the sake of this article, I’ll assume more diversification is better.
What Index do they Track?
ITOT tracks the S&P Total Market Index and VTI tracks the CRSP (Center for Research in Securities Prices) Total Market Index. Both are cap weighted indexes.
ITOT currently has a yield of 1.20% while VTI has a yield of 1.26%. It’s not a huge different, but just enough for VTI to pull ahead.
Trading Volume and Considerations
VTI is 1.21 Billion dollars in Daily Volume while ITOT is 366 Million. The Median 30 day bid/ask spreads for VTI and ITOT are 0.02% and 0.01% respectively. Tracking Errors are 1.56 and 1.54 respectively.
I’m saying it’s a tie because at this level it is so close. Trading volume is adequate for both ETF’s so I don’t think it’s a consideration. ITOT has a little less spread and tracking error.
Performance is of course, one of the main things on investors minds when they purchase an ETF. I think you must be careful when making decisions based on historical/past data, as there is no guarantee it will behave the same way. However, let’s look at these two funds since 2004 (ITOT’s inception year).
It seems VTI edges it out by just a small bit from 2004 to 2022. 10.04% CAGR vs. 9.88%. At the same time, I did notice over the last year ITOT is ahead of VTI by a tiny bit. It’s my understanding that VTI has a bit more exposure to small and medium cap stocks, perhaps driving the outperformance over the last eighteen years. They are neck and neck, you aren’t seeing too great of a difference.
I don’t think you can go wrong with either of these total market ETF’s if your goal is to get market returns or be a Boglehead :). However, even though I own ITOT, it seems VTI gets the edge slightly here. So far, it has offered better long-term performance and a better yield. So, I’m pronouncing VTI as the winner for today.