ITOT vs. VTI [iShares Total US Stock ETF vs. Vanguard]

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
User avatar
Topic Author
TheTimeLord
Posts: 9245
Joined: Fri Jul 26, 2013 2:05 pm

ITOT vs. VTI [iShares Total US Stock ETF vs. Vanguard]

Post by TheTimeLord »

Is there really any meaningful difference between ITOT (iShares Core S&P Total US Stock Mkt ETF) and VTI (Vanguard Total Stock Market ETF). I know they have slightly different compositions and ER but is it enough to actually matter?
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
livesoft
Posts: 76600
Joined: Thu Mar 01, 2007 8:00 pm

Re: ITOT vs. VTI

Post by livesoft »

Nope, not enough difference to matter to most folks.
Wiki This signature message sponsored by sscritic: Learn to fish.
Dave55
Posts: 1156
Joined: Tue Sep 03, 2013 2:51 pm

Re: ITOT vs. VTI

Post by Dave55 »

VTI market cap is $39.4 billion
ITOT market cap is $49.4 billion

VTI holds 3765 stocks (holds mid caps and small cap stocks)
VTI tracks the CRSP total stock market index (VTI holds almost every liquid US stock)

ITOT holds 1504 stocks (ITOT holds the largest 1504 stocks)
ITOT's tracks the broad S&P 1500

VTI 10 year return 8.75%
ITOT 10 year return 8.32%

Dave
"Reality always wins, your only job is to get in touch with it." Wilfred Bion
stlutz
Posts: 5577
Joined: Fri Jan 02, 2009 1:08 am

Re: ITOT vs. VTI

Post by stlutz »

These pages provide a good comparison between the two:

http://www.etf.com/ITOT
http://www.etf.com/VTI

ITOT is the weakest offering in the iShares Core lineup, IMO. I would expect a "total market" fund to own thousands of stocks, not just 1500. ITOT covers about 90% of the US market; VTI covers about 98%.

However, it is important not to exaggerate the differences either. Over the long haul, the performance difference between the two would be < .2% per year, and I can't tell you ahead of time which will come out ahead (VTI starts out with a couple basis point advantage due to costs).

If I was at Fidelity and could trade ITOT free of charge, I would use it if I was investing in $500 increments. If I was buying in blocks of $5000 or $10,000, I'd pay the $8 commission and go with VTI.
User avatar
nisiprius
Advisory Board
Posts: 43742
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: ITOT vs. VTI

Post by nisiprius »

In my personal opinion, given the choice between two very-low-cost index ETFs, from big brand-name companies that have good reputations, that use indexes from two competent index providers that are supposed to track about the same thing, do what is convenient, and don't overthink.

Consider these two facts:

1) ITOT has an 0.07% ER while VTI has only 0.05%. Theoretically, then, since inception ten years ago, on a $10,000 initial investment--say an average of $15,000 over the whole time period--VTI ought to have earned 0.02% x $15,000 x 10 = $30 more.

2) According to Morningstar, in fact, VTI earned $100 less.
Image

What can you say about that but "go figure?"

A $10,000 investment in either of those two funds frequently can fluctuate by over $100 from one day to the next--so, seriously, we care about a $30 difference over 10 years?

To put it yet another way, over the last ten years, a portfolio of either 100% ITOT or VTI grew $10,000 to about $23,000.
A portfolio of 100% Vanguard Total Bond grew $10,000 to about $15,500.
100/0 -> 0/100 = a difference of $7,500.
Or $75 per percentage point of allocation difference. (Yes, I know about the efficient frontier curve, but roughly).

That means it is forty times more important to choose whether you want your asset allocation to be 60/40 or 50/50 than it is to decide whether the stock part should be VTI or ITOT. 60/40 versus 50/50 makes a $750 difference, VTOT versus VTI makes an $18 difference.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
JDDS
Moderator
Posts: 1056
Joined: Sun Mar 16, 2014 2:24 pm

Re: ITOT vs. VTI

Post by JDDS »

stlutz wrote:These pages provide a good comparison between the two:

http://www.etf.com/ITOT
http://www.etf.com/VTI

ITOT is the weakest offering in the iShares Core lineup, IMO. I would expect a "total market" fund to own thousands of stocks, not just 1500. ITOT covers about 90% of the US market; VTI covers about 98%.

Good links. They showthat VTI is marginally better--higher trading volume, lower average spread. VTI should be approaching 100% of market cap now that it is using the CRSP index which includes micro cap. Last year VTI had 6% nonqualified dividends, but so far this year they're 100%; I think the lapse last year was due the index switch.

I agree that either one should work just fine. Though the iShares branding is somewhat annoying.
placeholder
Posts: 4715
Joined: Tue Aug 06, 2013 12:43 pm

Re: ITOT vs. VTI

Post by placeholder »

It does sound like ITOT would be a decent tax loss harvest partner for VTI.
User avatar
Topic Author
TheTimeLord
Posts: 9245
Joined: Fri Jul 26, 2013 2:05 pm

Re: ITOT vs. VTI

Post by TheTimeLord »

stlutz wrote: I would expect a "total market" fund to own thousands of stocks, not just 1500. ITOT covers about 90% of the US market; VTI covers about 98%.
I differ there because my understanding is all index funds try to emulate not replicate their index and I really don't believe there is a difference between 2 funds trying to track the same index, one with 1,500 stocks and the other with 5,000. That said these 2 ETFs track different indexes.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
avalpert
Posts: 6313
Joined: Sat Mar 22, 2008 4:58 pm

Re: ITOT vs. VTI

Post by avalpert »

StarbuxInvestor wrote:
stlutz wrote: I would expect a "total market" fund to own thousands of stocks, not just 1500. ITOT covers about 90% of the US market; VTI covers about 98%.
I differ there because my understanding is all index funds try to emulate not replicate their index and I really don't believe there is a difference between 2 funds trying to track the same index, one with 1,500 stocks and the other with 5,000. That said these 2 ETFs track different indexes.
That's ridiculous - whether the difference is of a magnitude to matter will depend but of course their is a real difference between a fund that is sampling one third the sample size of another fund on the same index, it's basic statistics.

In this case they aren't even covering the same index so the sampling differences aren't random so you have to look at the impact of intentionally cutting off the bottom of the market from your sampling pool.
User avatar
Topic Author
TheTimeLord
Posts: 9245
Joined: Fri Jul 26, 2013 2:05 pm

Re: ITOT vs. VTI

Post by TheTimeLord »

avalpert wrote:
StarbuxInvestor wrote:
stlutz wrote: I would expect a "total market" fund to own thousands of stocks, not just 1500. ITOT covers about 90% of the US market; VTI covers about 98%.
I differ there because my understanding is all index funds try to emulate not replicate their index and I really don't believe there is a difference between 2 funds trying to track the same index, one with 1,500 stocks and the other with 5,000. That said these 2 ETFs track different indexes.
That's ridiculous - whether the difference is of a magnitude to matter will depend but of course their is a real difference between a fund that is sampling one third the sample size of another fund on the same index, it's basic statistics.

Yes I firmly believe that more stocks does not make any meaningful difference in cap weighted broad indexes. Apple makes up 2.78% of the VTI, the top 10 holdings 14.29%, Apple makes up 3.20% of ITO and the top 10 holdings make up 15.91%. I can't give you an exact number but I would say it is very likely the additional 8% of the market covered by VTI makes up somewhere between 1%-3% of the fund. Hundreds of stocks divesified stocks making up such a tiny percentage of the fund is not going to have a large influence. Cap weighting and diversification and the correlation to the U.S. and global economies changes everything.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
User avatar
JoMoney
Posts: 11524
Joined: Tue Jul 23, 2013 5:31 am

Re: ITOT vs. VTI [iShares Total US Stock ETF vs. Vanguard]

Post by JoMoney »

It's not likely to make any long-term difference, the similarities are so so close as to make any differences meaningless over the long-term.
But, FWIW S&P uses slightly different criteria for constructing their indexes. Sometimes what they "filter" out is beneficial, sometimes its a detriment. In the long run expenses will probably make a larger impact.
It's difficult to highlight a period where it would have made a difference because ITOT doesn't extend back far enough, but to attempt an illustration here's the Vanguard Extended Market Index which includes everything in the Total Stock Market that is not included in the S&P500. Compared with IJH (S&P Mid-Cap 400) and IJS (S&P Small-Capp 600) which make up the "completion" of the S&P Total Market 1500.
Image
When the late '90s Dot-Com bubble burst, there were a lot of tech/Internet stocks that didn't have a record of any kind of earnings. Many of these failed to meet the criteria for inclusion in the S&P indexes. Because of the large ones weren't in the S&P500, they were included in the extended market index and drug it down during a period where small and mid-cap stocks in general didn't suffer the bubble burst as harshly as the largest large cap stocks.

The extended market only made up something like 15-20% of the "Total Market", so the impact is somewhat muted in the more diversified Total Market fund, and the broader coverage in the Extended Market actually helped the fund in the years that followed in the recovery:
Image
... So they are slightly different, they use different methodologies for selecting stocks, but that criteria cuts both ways - its more a matter of preference (if you have one). I think the costs are likely to make a more meaningful long-term impact, and I think Vanguard has the edge when it comes to lower cost and keeping costs low.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham
avalpert
Posts: 6313
Joined: Sat Mar 22, 2008 4:58 pm

Re: ITOT vs. VTI

Post by avalpert »

StarbuxInvestor wrote: I can't give you an exact number but I would say it is very likely the additional 8% of the market covered by VTI makes up somewhere between 1%-3% of the fund.
Huh? It should make up about 8% of the fund on a market cap basis - since that is what the 'additional 8%' is a measure of. I don't think that is such a tiny percentage - particularly when you consider it is not a random difference.
User avatar
Topic Author
TheTimeLord
Posts: 9245
Joined: Fri Jul 26, 2013 2:05 pm

Re: ITOT vs. VTI

Post by TheTimeLord »

avalpert wrote:
StarbuxInvestor wrote: I can't give you an exact number but I would say it is very likely the additional 8% of the market covered by VTI makes up somewhere between 1%-3% of the fund.
Huh? It should make up about 8% of the fund on a market cap basis - since that is what the 'additional 8%' is a measure of. I don't think that is such a tiny percentage - particularly when you consider it is not a random difference.
So you are supposing these are unique industries you are adding not represented in 90% of the market or that these stocks are performing out of sync with the economy (maybe we should be stock picking). No since they are smaller cap company's chances are they are now multinational and tied more to the domestic economy than the global economy so my guess is what you are likely getting is a domestic bias in VTI vs. ITOT. Yeah I botched the percentages. Key point is unless you believe in picking individual stocks then it is the economy and sectors that matters in performance not the numbers of holding provided you have a truly represenative sample and cover the major players. Indiviudal stocks per se are not unique sampling points because they share so many charaterstics with other company's in there space.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
avalpert
Posts: 6313
Joined: Sat Mar 22, 2008 4:58 pm

Re: ITOT vs. VTI

Post by avalpert »

StarbuxInvestor wrote:
avalpert wrote:
StarbuxInvestor wrote: I can't give you an exact number but I would say it is very likely the additional 8% of the market covered by VTI makes up somewhere between 1%-3% of the fund.
Huh? It should make up about 8% of the fund on a market cap basis - since that is what the 'additional 8%' is a measure of. I don't think that is such a tiny percentage - particularly when you consider it is not a random difference.
So you are supposing these are unique industries you are adding not represented in 90% of the market or that these stocks are performing out of sync with the economy (maybe we should be stock picking).
No, I'm supposing that the best current evidence suggests that size itself is a relevant factor in explaining returns so when the difference in your index is systematic exclusion by size it should be expected to impact returns.

Yeah I botched the percentages. Key point is unless you believe in picking individual stocks then it is the economy and sectors that matters in performance not the numbers of holding provided you have a truly represenative sample and cover the major players.
This is not what the evidence suggests - in fact sectors don't matter as much as size and valuation do.
User avatar
Topic Author
TheTimeLord
Posts: 9245
Joined: Fri Jul 26, 2013 2:05 pm

Re: ITOT vs. VTI

Post by TheTimeLord »

avalpert wrote:
StarbuxInvestor wrote:
avalpert wrote: This is not what the evidence suggests - in fact sectors don't matter as much as size and valuation do.
I would say size, growth rate, market size and valuation which you believe are independent of sector.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
an_asker
Posts: 3299
Joined: Thu Jun 27, 2013 2:15 pm

Re: ITOT vs. VTI

Post by an_asker »

placeholder wrote: Sun Oct 26, 2014 12:16 pm It does sound like ITOT would be a decent tax loss harvest partner for VTI.
Does this still hold? Would it work against SWTSX as well?

Thanks!
User avatar
jason2459
Posts: 989
Joined: Wed May 06, 2020 7:59 pm

Re: ITOT vs. VTI

Post by jason2459 »

an_asker wrote: Tue Mar 09, 2021 9:27 pm
placeholder wrote: Sun Oct 26, 2014 12:16 pm It does sound like ITOT would be a decent tax loss harvest partner for VTI.
Does this still hold? Would it work against SWTSX as well?

Thanks!
ITOT and VTI are are perfect TLH pair. If SWTSX is a total market fund then yes that would work well with either ITOT or VTI. What index does it follow?

An advantage to VTI/ITOT is not only are they from different companies but they follow different indexes as well.
"In the short run, the stock market is a voting machine; in the long run, it is a weighing machine" ~Benjamin Graham
donaldfair71
Posts: 774
Joined: Wed Mar 06, 2013 4:15 pm

Re: ITOT vs. VTI [iShares Total US Stock ETF vs. Vanguard]

Post by donaldfair71 »

Zero discernible difference. Use interchangeably.

One correction of a mistake I’m seeing, ITOT holds 3591 stocks, VTI holds more but less than 3700 I believe.

For all intents and purposes, these two, along with SCHB and SPTM can be used as commodities, one and the same.
User avatar
jason2459
Posts: 989
Joined: Wed May 06, 2020 7:59 pm

Re: ITOT vs. VTI [iShares Total US Stock ETF vs. Vanguard]

Post by jason2459 »

donaldfair71 wrote: Tue Mar 09, 2021 9:42 pm Zero discernible difference. Use interchangeably.

One correction of a mistake I’m seeing, ITOT holds 3591 stocks, VTI holds more but less than 3700 I believe.

For all intents and purposes, these two, along with SCHB and SPTM can be used as commodities, one and the same.
Itot and vti switch back and forth pretty regularly on which one has the most holdings and which one is slightly more tax efficient then the other. You'd be surprised at what the bottom holdings are. Usually dragging along defunct companies until they're dropped from the index.
"In the short run, the stock market is a voting machine; in the long run, it is a weighing machine" ~Benjamin Graham
donaldfair71
Posts: 774
Joined: Wed Mar 06, 2013 4:15 pm

Re: ITOT vs. VTI [iShares Total US Stock ETF vs. Vanguard]

Post by donaldfair71 »

jason2459 wrote: Tue Mar 09, 2021 9:51 pm
donaldfair71 wrote: Tue Mar 09, 2021 9:42 pm Zero discernible difference. Use interchangeably.

One correction of a mistake I’m seeing, ITOT holds 3591 stocks, VTI holds more but less than 3700 I believe.

For all intents and purposes, these two, along with SCHB and SPTM can be used as commodities, one and the same.
Itot and vti switch back and forth pretty regularly on which one has the most holdings and which one is slightly more tax efficient then the other. You'd be surprised at what the bottom holdings are. Usually dragging along defunct companies until they're dropped from the index.
Yessir.

I wasn’t certain on exact numbers (only on ITOT because just today I was looking at the fact sheet, random coincidence and remembered the numbers), just knew that it was ~98%+ identical.
placeholder
Posts: 4715
Joined: Tue Aug 06, 2013 12:43 pm

Re: ITOT vs. VTI [iShares Total US Stock ETF vs. Vanguard]

Post by placeholder »

Understand that no one really knows so it's not a factual matter you can request an answer on and at least one regular insists that the irs told him that it requires < 80% overlap (whatever that exactly means) but I would be fine with any of those swaps.
Post Reply