Gains of the SPY With Higher Diversification?

Unless you’ve been living under a rock, you know about the market’s most popular, most liquid ticker – SPY, State Street’s S&P 500 ETF.

Up 66.5% over the last five-years, it’s not hard to see why folks love it.

But we’re not here to talk about the SPY today.

Instead, we’re going to talk about one of the least well-known index ETFs out there – VTI, Vanguard’s Total Market ETF.

It holds a unique position amongst index ETFs as one of the most popular with investors looking for lower risk equity returns, at least according to our Trackstar Data.

As we dug into the details, it turns out there is a LOT to love about this ETF.

Key Facts About VTI

• Net assets: $316 billion
• 12-month trailing yield: 1.51%
• Inception: May 24, 2001
• Expense ratio: 0.16%
• Number of holdings: 3818

The S&P 500 Index holds the largest 500 equities by market capitalization.

The Total Market Index just owns EVERY investable stock there is, from Apple all the way down to micro-caps. It does not hold REITs and preferred shares.

Like the S&P 500, the Total Market Index is weighted by market cap, giving the largest companies more weight.

That’s why the top 10 holdings don’t look all that different from the S&P 500.

Source: Vanguard

Unsurprisingly, you get similar sector weightings to the major indexes.

Source: Vanguard

The big difference is when you add in those other 3,300+ companies to the S&P 500, you get higher diversification, a bit less volatility, and still maintain a good amount of the performance.

Performance

The big difference is when you add in those other 3,300+ companies to the S&P 500, you get higher diversification, a bit less volatility, and still maintain a good amount of performance.

Source: Vanguard

As we noted earlier, the 5-year cumulative return on the S&P 500 is 66.5%.

The cumulative return for the Total Market Index during that same period is 60%.

Competition

So, let’s see how the VTI stacks up against the other major index ETFs:

• State Street S&P 500 ETF (SPY): The gold standard of index ETFs, the SPY captures the top 500 companies by market capitalization, weighted accordingly.
• Invesco QQQ NASDAQ 100 ETF (QQQ): If you’re looking for a more tech-focused index, the NASDAQ 100 holds some of the largest tech and non-financial names listed on the NASDAQ exchange.
• iShares Russell 2000 ETF (IWM): The Russell 2000 invests in the smallest 2000 companies by market capitalization. These stocks are often more volatile and sensitive to economic cycles.
• State Street Dow Jones Industrial Average ETF (DIA): The often quoted but rarely used Dow Jones Industrial Average invests in 30 publicly traded companies on the NYSE and NASDAQ. Tickers are weighted by price and are selected by the editors at the Wall Street Journal. 

What you’ll find below is technology-leaning, and large-cap indexes still reign supreme.

However, the VTI has a dirt-cheap expense ratio that’s only 1/3rd the cost of the SPY.

Our Opinion 10/10 

We were quite impressed with the performance of this index as well as its cost structure.

For those who want a bit less volatility without sacrificing too much in the way of returns, the VTI is an excellent choice as a core holding.

• Don’t Make My Size Your Problem
• All eyes are on Real Estate & Private Equity as investors hedge against inflation
• Airbnb is Still A Financial Pro Favorite
• Energy Transfer Still a Favorite MLP