The iShares Core S&P Total U.S. Stock Market ETF (ITOT) and the iShares MSCI Emerging Markets ETF (EEM) are both among the Top 100 ETFs. ITOT is a iShares Large Blend fund and EEM is a iShares Diversified Emerging Mkts fund. So, what’s the difference between ITOT and EEM? And which fund is better?
The expense ratio of ITOT is 0.65 percentage points lower than EEM’s (0.03% vs. 0.68%). ITOT also has a higher exposure to the technology sector and a lower standard deviation. Overall, ITOT has provided higher returns than EEM over the past ten years.
In this article, we’ll compare ITOT vs. EEM. We’ll look at fund composition and annual returns, as well as at their industry exposure and portfolio growth. Moreover, I’ll also discuss ITOT’s and EEM’s holdings, performance, and risk metrics and examine how these affect their overall returns.
Summary
| ITOT | EEM | |
| Name | iShares Core S&P Total U.S. Stock Market ETF | iShares MSCI Emerging Markets ETF |
| Category | Large Blend | Diversified Emerging Mkts |
| Issuer | iShares | iShares |
| AUM | 41.97B | 30.33B |
| Avg. Return | 14.59% | 5.47% |
| Div. Yield | 1.2% | 1.48% |
| Expense Ratio | 0.03% | 0.68% |
The iShares Core S&P Total U.S. Stock Market ETF (ITOT) is a Large Blend fund that is issued by iShares. It currently has 41.97B total assets under management and has yielded an average annual return of 14.59% over the past 10 years. The fund has a dividend yield of 1.2% with an expense ratio of 0.03%.
The iShares MSCI Emerging Markets ETF (EEM) is a Diversified Emerging Mkts fund that is issued by iShares. It currently has 30.33B total assets under management and has yielded an average annual return of 5.47% over the past 10 years. The fund has a dividend yield of 1.48% with an expense ratio of 0.68%.
ITOT’s dividend yield is 0.28% lower than that of EEM (1.2% vs. 1.48%). Also, ITOT yielded on average 9.12% more per year over the past decade (14.59% vs. 5.47%). The expense ratio of ITOT is 0.65 percentage points lower than EEM’s (0.03% vs. 0.68%).
Fund Composition
Industry Exposure
| ITOT | EEM | |
| Technology | 24.49% | 21.36% |
| Industrials | 9.21% | 4.61% |
| Energy | 2.51% | 5.17% |
| Communication Services | 10.54% | 11.76% |
| Utilities | 2.35% | 1.99% |
| Healthcare | 13.59% | 5.06% |
| Consumer Defensive | 5.79% | 5.45% |
| Real Estate | 3.67% | 1.98% |
| Financial Services | 13.69% | 18.39% |
| Consumer Cyclical | 11.69% | 15.16% |
| Basic Materials | 2.47% | 9.07% |
The iShares Core S&P Total U.S. Stock Market ETF (ITOT) has the most exposure to the Technology sector at 24.49%. This is followed by Financial Services and Healthcare at 13.69% and 13.59% respectively. Basic Materials (2.47%), Energy (2.51%), and Real Estate (3.67%) only make up 8.65% of the fund’s total assets.
ITOT’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.79%, 9.21%, 10.54%, 11.69%, and 13.59%.
The iShares MSCI Emerging Markets ETF (EEM) has the most exposure to the Technology sector at 21.36%. This is followed by Financial Services and Consumer Cyclical at 18.39% and 15.16% respectively. Utilities (1.99%), Industrials (4.61%), and Healthcare (5.06%) only make up 11.66% of the fund’s total assets.
EEM’s mid-section with moderate exposure is comprised of Energy, Consumer Defensive, Basic Materials, Communication Services, and Consumer Cyclical stocks at 5.17%, 5.45%, 9.07%, 11.76%, and 15.16%.
ITOT is 3.13% more exposed to the Technology sector than EEM (24.49% vs 21.36%). ITOT’s exposure to Financial Services and Healthcare stocks is 4.70% lower and 8.53% higher respectively (13.69% vs. 18.39% and 13.59% vs. 5.06%). In total, Basic Materials, Energy, and Real Estate also make up 7.57% less of the fund’s holdings compared to EEM (8.65% vs. 16.22%).
Holdings
| ITOT Holdings | Weight |
| Apple Inc | 5.07% |
| Microsoft Corp | 4.75% |
| Amazon.com Inc | 3.16% |
| Facebook Inc Class A | 1.89% |
| Alphabet Inc Class A | 1.79% |
| Alphabet Inc Class C | 1.71% |
| Tesla Inc | 1.17% |
| Berkshire Hathaway Inc Class B | 1.17% |
| NVIDIA Corp | 1.08% |
| JPMorgan Chase & Co | 1.02% |
ITOT’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 5.07%, 4.75%, 3.16%, 1.89%, and 1.79%.
Alphabet Inc Class C (1.71%), Tesla Inc (1.17%), and Berkshire Hathaway Inc Class B (1.17%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the ITOT’s holdings at 1.08% and 1.02%.
| EEM Holdings | Weight |
| Taiwan Semiconductor Manufacturing Co Ltd | 6.36% |
| Alibaba Group Holding Ltd Ordinary Shares | 4.58% |
| Tencent Holdings Ltd | 4.41% |
| Samsung Electronics Co Ltd | 4.05% |
| Meituan | 1.24% |
| Vale SA | 1.04% |
| Naspers Ltd Class N | 1.04% |
| Reliance Industries Ltd Shs Dematerialised | 0.97% |
| Infosys Ltd | 0.92% |
| China Construction Bank Corp Class H | 0.83% |
EEM’s Top Holdings are Taiwan Semiconductor Manufacturing Co Ltd, Alibaba Group Holding Ltd Ordinary Shares, Tencent Holdings Ltd, Samsung Electronics Co Ltd, and Meituan at 6.36%, 4.58%, 4.41%, 4.05%, and 1.24%.
Vale SA (1.04%), Naspers Ltd Class N (1.04%), and Reliance Industries Ltd Shs Dematerialised (0.97%) have a slightly smaller but still significant weight. Infosys Ltd and China Construction Bank Corp Class H are also represented in the EEM’s holdings at 0.92% and 0.83%.
Risk Analysis
| ITOT | EEM | |
| Mean Return | 1.27 | 0.38 |
| R-squared | 99.4 | 83.5 |
| Std. Deviation | 14.02 | 17.79 |
| Alpha | -0.54 | -2.33 |
| Beta | 1.03 | 1.08 |
| Sharpe Ratio | 1.04 | 0.22 |
| Treynor Ratio | 14.13 | 2.22 |
The iShares Core S&P Total U.S. Stock Market ETF (ITOT) has a Mean Return of 1.27 with a Beta of 1.03 and a R-squared of 99.4. Its Alpha is -0.54 while ITOT’s Standard Deviation is 14.02. Furthermore, the fund has a Treynor Ratio of 14.13 and a Sharpe Ratio of 1.04.
The iShares MSCI Emerging Markets ETF (EEM) has a Alpha of -2.33 with a Sharpe Ratio of 0.22 and a Beta of 1.08. Its R-squared is 83.5 while EEM’s Treynor Ratio is 2.22. Furthermore, the fund has a Standard Deviation of 17.79 and a Mean Return of 0.38.
ITOT’s Mean Return is 0.89 points higher than that of EEM and its R-squared is 15.90 points higher. With a Standard Deviation of 14.02, ITOT is slightly less volatile than EEM. The Alpha and Beta of ITOT are 1.79 points higher and 0.05 points lower than EEM’s Alpha and Beta.
Performance
Annual Returns
| Year | ITOT | EEM |
| 2020 | 20.75% | 17.56% |
| 2019 | 30.87% | 17.67% |
| 2018 | -5.27% | -14.98% |
| 2017 | 21.23% | 36.42% |
| 2016 | 12.59% | 10.51% |
| 2015 | 0.96% | -15.41% |
| 2014 | 13.01% | -2.82% |
| 2013 | 32.67% | -3.14% |
| 2012 | 15.98% | 17.32% |
| 2011 | 1.55% | -18.87% |
| 2010 | 16.15% | 15.93% |
ITOT had its best year in 2013 with an annual return of 32.67%. ITOT’s worst year over the past decade yielded -5.27% and occurred in 2018. In most years the iShares Core S&P Total U.S. Stock Market ETF provided moderate returns such as in 2014, 2012, and 2010 where annual returns amounted to 13.01%, 15.98%, and 16.15% respectively.
The year 2017 was the strongest year for EEM, returning 36.42% on an annual basis. The poorest year for EEM in the last ten years was 2011, with a yield of -18.87%. Most years the iShares MSCI Emerging Markets ETF has given investors modest returns, such as in 2014, 2016, and 2010, when gains were -2.82%, 10.51%, and 15.93% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| ITOT | $10,000 | $42,310 | 14.59% |
| EEM | $10,000 | $15,578 | 5.47% |
A $10,000 investment in ITOT would have resulted in a final balance of $42,310. This is a profit of $32,310 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.59%.
With a $10,000 investment in EEM, the end total would have been $15,578. This equates to a $5,578 profit over 11 years and a compound annual growth rate (CAGR) of 5.47%.
ITOT’s CAGR is 9.12 percentage points higher than that of EEM and as a result, would have yielded $26,732 more on a $10,000 investment. Thus, ITOT outperformed EEM by 9.12% annually.
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