Investing in a total U.S. stock market fund is a great decision. But choosing between the two biggest ETFs almost requires splitting hairs.
A simple way to build out the foundation of a long-term portfolio and diversify it is to use total market funds. Whether focused on stocks or bonds, these funds give you the entire market under a single ticker symbol. If you find the right one, it will probably be incredibly cheap to own, too.
Two of the biggest (and best) are the Vanguard Total Stock Market ETF (VTI 0.06%) and the iShares Core S&P Total U.S. Stock Market ETF (ITOT 0.06%). And on the surface, the two ETFs look identical. But, as is the case with many ETFs, you sometimes need to dig deep into the details to determine if one is a better buy.
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Total stock market ETFs: Vanguard vs. iShares
The Vanguard Total Stock Market ETF tracks the CRSP US Total Market Index. This index is designed to represent approximately 100% of the investable U.S. stock market, including large-, mid-, and small-cap stocks.
The iShares Core S&P Total U.S. Stock Market ETF tracks the S&P Total Market Index. It, too, aims to capture the entire U.S. stock market and is a combination of the S&P 500 and the S&P Completion Index.
Translation: They both invest in the entire U.S. stock market. They just execute their plans in slightly different ways.
The biggest difference between the two funds is the number of individual holdings. The Vanguard ETF holds around 3,500 stocks, but the iShares ETF holds closer to 2,500. While that sounds like a big difference, the material impact is relatively negligible.
Vanguard Total Stock Market ETF
Today’s Change
(-0.06%) $-0.20
Current Price
$341.85
Key Data Points
Day’s Range
$341.07 – $343.05
52wk Range
$236.42 – $343.67
Volume
6.4M
Most of the “extra” 1,000 stocks that the Vanguard ETF holds are micro-cap stocks that are screened out by the iShares fund due to liquidity concerns and other size-related factors. In a market-cap-weighted strategy, those 1,000 stocks, even in aggregate, may account for only 1% to 2% of the total portfolio.
The majority of the portfolio for both ETFs is essentially identical. Therefore, these funds pretty much perform the same, and their historical track records are virtually identical.
iShares Trust – iShares Core S&P Total U.s. Stock Market ETF
Today’s Change
(-0.06%) $-0.09
Current Price
$151.56
Key Data Points
Day’s Range
$151.23 – $152.10
52wk Range
$105.00 – $152.38
Volume
3.2M
Given that both charge a 0.03% expense ratio, are highly liquid, and are highly tradable, neither ETF holds a cost advantage.
Which ETF is the better buy?
This is about as close a toss-up as you’ll find.
The only material difference between the two funds is the extra 1,000 stocks that the Vanguard ETF holds. But given that these are all tiny micro-cap stocks, their impact on portfolio performance will, at best, be minimal.
I’ll choose the Vanguard Total Stock Market ETF by the narrowest of margins because why not have those extra stocks and make it a true total U.S. stock market portfolio if you can?
But in reality, you’re very unlikely to see any meaningful difference in performance or fees, no matter which ETF you choose.