If you’re an investor looking to gain exposure to the U.S. equity market, you may have come across the iShares Core S&P 500 ETF (IVV) and the iShares Core S&P Total U.S. Stock Market ETF (ITOT).
ITOT vs IVV: Both are exchange-traded funds (ETFs) that offer investors low-cost exposure to a broad basket of domestic stocks.
While both ETFs track the U.S. equity market, there are some key differences between them that investors should be aware of before making a decision.
Understanding ITOT and IVV The iShares Core S&P 500 ETF (IVV) tracks the performance of the S&P 500, which is a market-cap-weighted index of 500 large-cap U.S. stocks. The iShares Core S&P Total U.S. Stock Market ETF (ITOT), on the other hand, tracks the performance of the S&P Total Market Index, which includes all U.S. common equities listed on the NYSE, NASDAQ, and BATS exchanges. As such, ITOT provides investors with exposure to a broader range of U.S. stocks, including small- and mid-cap stocks that are not included in the S&P 500.
Performance Metrics When comparing the performance of ITOT vs. IVV, it’s important to look at their respective returns, expense ratios, and yields. While both ETFs have similar expense ratios, ITOT has a slightly higher yield due to its exposure to small- and mid-cap stocks. Additionally, ITOT has outperformed IVV over the past five years, but IVV has outperformed ITOT over the past ten years. Investors should consider their investment goals and risk tolerance when deciding which ETF to invest in.
Key Takeaways ITOT vs IVV
- IVV tracks the S&P 500, while ITOT tracks the S&P Total Market Index, providing exposure to a broader range of U.S. stocks.
- ITOT has a slightly higher yield due to its exposure to small- and mid-cap stocks, but IVV has outperformed ITOT over the past ten years.
- Investors should consider their investment goals and risk tolerance when deciding which ETF to invest in.
Understanding ITOT vs IVV
If you’re looking to invest in the US stock market, you may have come across two Exchange Traded Funds (ETFs) with similar profiles: ITOT and IVV. In this section, we’ll take a closer look at both funds to help you understand their objectives and issuers.
ITOT, which stands for iShares Core S&P Total US Stock Market ETF, aims to track the performance of the S&P Total Market Index. This index includes all US equity securities with readily available prices, covering approximately 3,500 companies across all sectors of the economy. By investing in ITOT, you’ll get exposure to the entire US stock market, including small, mid, and large-cap companies.
IVV, which stands for iShares Core S&P 500 ETF, aims to track the performance of the S&P 500 Index. This index includes 500 large-cap US companies across all sectors of the economy. By investing in IVV, you’ll get exposure to the largest and most established US companies.
Both ITOT and IVV are issued by BlackRock, a global investment management corporation. BlackRock is the world’s largest asset manager, with over $9 trillion in assets under management as of September 2021. iShares is BlackRock’s ETF brand, offering a wide range of ETFs covering various asset classes and investment strategies.
In summary, ITOT and IVV are both iShares ETFs issued by BlackRock, aiming to track the performance of different indices covering the US stock market. While ITOT provides exposure to the entire US stock market, including small and mid-cap companies, IVV focuses on the largest and most established US companies.
Performance Metrics ITOT vs IVV
When comparing ITOT and IVV, performance metrics are an essential aspect to consider. This section will evaluate the historical returns and risk-adjusted performance of both ETFs.
Historical returns provide insight into how an ETF has performed over a specific period. According to ETF Database, ITOT has a YTD return of 22.12%, a 1-year return of 25.67%, a 3-year return (ann) of 17.95%, a 5-year return (ann) of 16.30%, and a 10-year return (ann) of 14.10%. In comparison, IVV has a YTD return of 23.06%, a 1-year return of 26.16%, a 3-year return (ann) of 18.68%, a 5-year return (ann) of 16.85%, and a 10-year return (ann) of 14.68%.
Risk-adjusted performance measures how much return an ETF generates in relation to the risk taken. The Sharpe ratio and alpha are two popular risk-adjusted performance metrics. According to ETF.com, ITOT has a Sharpe ratio of 1.17 and an alpha of 1.07, while IVV has a Sharpe ratio of 1.22 and an alpha of 1.17.
In conclusion, both ITOT and IVV have performed well historically, with IVV slightly outperforming ITOT in terms of YTD return, 1-year return, and risk-adjusted performance. However, it is essential to note that past performance does not guarantee future results, and investors should conduct their own research before making investment decisions.
Comparative Analysis ITOT vs IVV
When comparing ITOT vs IVV, there are several factors to consider. In this section, we will analyze three of the most important factors: Expense Ratios, Holdings and Diversification, and Market Capitalization.
Expense ratios are an important consideration when comparing ETFs. The expense ratio is the annual fee that the fund charges to cover its operating expenses. In general, a lower expense ratio is better because it means that more of your money is going towards the investments and less towards fees.
Both ITOT and IVV have very low expense ratios. ITOT has an expense ratio of 0.03%, while IVV has an expense ratio of 0.04%. While the difference may seem small, over time it can add up and impact your returns.
Holdings and Diversification
Another important factor to consider when comparing ETFs is holdings and diversification. ITOT and IVV both track the S&P 500 index, but ITOT holds all 3,000 stocks in the index while IVV only holds the top 500.
This means that ITOT is more diversified than IVV, which can be beneficial for investors looking to reduce risk. However, IVV’s focus on the top 500 stocks means that it may be more representative of the overall market.
Market capitalization is the total value of a company’s outstanding shares of stock. When comparing ITOT vs IVV, it’s important to consider the market capitalization of the companies included in each ETF.
IVV has a larger market capitalization than ITOT because it only includes the top 500 companies in the S&P 500 index. This means that IVV may be more heavily weighted towards larger companies, while ITOT may be more evenly distributed across companies of all sizes.
Overall, when comparing ITOT vs IVV, it’s important to consider your investment goals and risk tolerance. Both ETFs have low expense ratios and track the S&P 500 index, but differ in their holdings and diversification. By understanding these differences, you can make an informed decision about which ETF is right for you.
When it comes to investing in the stock market, there are many different strategies that investors use. In this section, we will discuss two popular strategies for investing in ITOT and IVV: buy and hold and portfolio construction.
Buy and Hold
The buy and hold strategy is a long-term investment strategy where you buy a stock or ETF and hold onto it for an extended period of time. This strategy is popular among investors who believe in the long-term growth potential of the stock market and want to avoid the short-term volatility that comes with trading.
For investors interested in using the buy and hold strategy with ITOT and IVV, it’s important to consider the historical performance of these ETFs. According to ETF Database, both ITOT and IVV have had strong historical performance, with IVV slightly outperforming ITOT over the past 5 years.
Another factor to consider when using the buy and hold strategy with these ETFs is their dividends. Both ITOT and IVV pay dividends, with ITOT having a slightly higher yield than IVV. If you’re looking for a steady stream of income from your investments, ITOT may be a better choice.
Portfolio construction is another popular investment strategy that involves diversifying your investments across different asset classes, sectors, and geographies. By diversifying your portfolio, you can reduce your overall risk and potentially increase your returns.
When constructing a portfolio with ITOT and IVV, it’s important to consider the assets under management (AUM) of these ETFs. According to ETF Database, IVV has a much larger AUM than ITOT, which may make it a more attractive option for investors looking for a highly liquid ETF.
Another factor to consider when constructing a portfolio with these ETFs is their correlation. Both ITOT and IVV track the S&P 500 index, which means they have a high degree of correlation. If you’re looking to diversify your portfolio, you may want to consider adding ETFs that track different indexes or asset classes.
In conclusion, both the buy and hold and portfolio construction strategies can be effective ways to invest in ITOT and IVV. By considering historical performance, dividends, AUM, and correlation, you can make an informed decision about which strategy is right for you.
When comparing ITOT vs IVV, it’s important to consider the potential risks of investing in these ETFs. In this section, we’ll examine two key risk considerations: volatility and drawdowns, and correlation with market indices.
Volatility and Drawdowns
Volatility and drawdowns are two important measures of risk that investors should consider when evaluating ETFs. Volatility refers to the degree of variation in an ETF’s price over time, while drawdowns refer to the percentage decline in an ETF’s price from its previous high.
According to a comparison tool, IVV has a lower volatility than ITOT, which means that it experiences smaller price fluctuations and is considered to be less risky than ITOT based on this measure. However, when it comes to drawdowns, ITOT has performed better than IVV over the past 10 years, with a maximum drawdown of -33.70% compared to IVV’s maximum drawdown of -34.06%.
Correlation with Market Indices
Another important risk consideration is the correlation between an ETF and market indices. Correlation measures the degree to which two investments move in the same direction. An ETF with a high correlation to market indices may be more risky because it is more likely to be affected by market downturns.
According to ETF Database, IVV tracks the S&P 500 index, which means that it has a high correlation with the U.S. stock market. ITOT, on the other hand, tracks a broader index that includes mid-cap and small-cap stocks in addition to the S&P 500. As a result, ITOT has a lower correlation with the U.S. stock market than IVV.