VTI vs IVV: Which S&P 500 ETF Offers Better Returns?

With exchange traded funds, investors looking for a diversified investment in the stock market can choose from a wide range of alternatives. Two reliable options that stand out in the US market are the Vanguard Total Stock Market ETF (VTI) and the iShares Core S&P 500 ETF (IVV). The purpose of this article is to compare these two ETFs and help investors understand which ETF is better suited to their investment objectives.

When it comes to exchange traded funds, many comparisons can be made. Basically, these comparisons are written to help investors make an informed decision. The aim is to highlight the similarities and differences between VTI and IVV by examining the investment objectives, assets, performance, management, fees and market conditions of the two ETFs. .

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Basic Information About VTI and IVV

Although both VTI and IVV are passive ETFs that track the S&P 500 Index, they have different investment objectives and strategies. VTI seeks to track the performance of the CRSP US Total Market Index, which includes more than 3,500 US large-, mid- and small-cap stocks. In contrast, IVV aims to track the performance of the S&P 500 Index, which includes the 500 largest US companies.

As of September 2021, VTI managed $250.9 billion in assets and applied a low expense ratio of 0.03%. IVV managed $313.7 billion in assets and had a slightly higher expense ratio of 0.03%.

How the Funds Compare in Performance

A comprehensive analysis of returns, risks and volatility is critical to compare past performance. Over the past five years, VTI has slightly outperformed IVV. However, IVV outperformed VTI last year as it invested more in the emerging technology sector during the pandemic.

In terms of risk and volatility, both ETFs have similar standard deviation and beta, suggesting a strong correlation with the overall market. However, VTI may have slightly lower risk due to its broader exposure to the overall US equity market.

VTI vs IVV Assets

Although VTI and IVV have many common stocks, their holdings differ in some respects. IVV has a larger allocation to the technology sector, while VTI has more diversified exposure to sectors such as healthcare and financials.

Both ETFs’ largest holdings include major US companies such as Apple, Microsoft and Amazon. However, IVV has a larger allocation to technology stocks such as Alphabet and Facebook, while VTI has a larger weighting to financial stocks such as JPMorgan Chase and Berkshire Hathaway.

Both VTI and IVV are passively managed exchange-traded funds that track the S&P 500 Index, but they are managed by different asset management companies.

Vanguard manages VTI, a well-known asset management company that offers a variety of low-cost ETFs and mutual funds. IVV is managed by BlackRock, one of the largest asset management companies in the world.

In terms of fees, VTI has a lower expense ratio of 0.03% compared to 0.04% for IVV. While this fee difference may seem insignificant, it could increase over time and affect long-term returns.

Which Fund to Choose Based on Market Conditions?

Current market conditions in the US and global economies can significantly impact the performance of VTI and IVV. In recent years, the US economy has enjoyed steady growth, low unemployment and strong equity market performance. However, the COVID-19 pandemic has created significant uncertainty and volatility in the stock market.

It is important for investors to understand economic and market conditions and their potential impact on investments. Both VTI and IVV have exposure to the US equity market and are subject to market risks.

Investors make a choice between VTI vs IVV based on different variables. In general, they should consider their investment objectives, risk tolerance and overall portfolio allocation. Both ETFs provide exposure to the S&P 500 Index and are therefore suitable for investors seeking broad-based exposure to US equities.

However, for investors looking for a diversified portfolio, VTI may be more attractive as it includes large-cap stocks as well as small-cap and mid-cap stocks. In contrast, IVV is more suitable for investors looking for a more focused portfolio that invests only in large-cap stocks.

Assessing investment objectives and risk tolerance is critical for investors to choose the ETF that best suits their goals.

Which to Choose?

In summary, both VTI and IVV are popular, highly liquid ETFs that provide exposure to the S&P 500 Index. While they have some similarities, there are important differences in terms of management, fees and holdings that investors should consider.

For investors looking for a more diversified portfolio, VTI may be a better choice because it includes small- and mid-cap stocks. IVV, on the other hand, may be more suitable for investors looking for a more concentrated portfolio with exposure only to large-cap stocks.

Ultimately, which ETF is best suited for an investor’s portfolio depends on individual investment goals, risk tolerance and overall portfolio allocation. As with any investment, it is important for investors to do their own research, assess market conditions and consult with a financial advisor before making an investment decision.