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ITOT vs. PFF: What’s The Difference?

The iShares Core S&P Total U.S. Stock Market ETF (ITOT) and the iShares Preferred and Income Securities ETF (PFF) are both among the Top 100 ETFs. ITOT is a iShares Large Blend fund and PFF is a iShares Preferred Stock fund. So, what’s the difference between ITOT and PFF? And which fund is better?

The expense ratio of ITOT is 0.43 percentage points lower than PFF’s (0.03% vs. 0.46%). ITOT also has a higher exposure to the technology sector and a higher standard deviation. Overall, ITOT has provided higher returns than PFF over the past ten years.

In this article, we’ll compare ITOT vs. PFF. We’ll look at industry exposure and risk metrics, as well as at their portfolio growth and annual returns. Moreover, I’ll also discuss ITOT’s and PFF’s holdings, performance, and fund composition and examine how these affect their overall returns.

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Summary

ITOTPFF
NameiShares Core S&P Total U.S. Stock Market ETFiShares Preferred and Income Securities ETF
CategoryLarge BlendPreferred Stock
IssueriSharesiShares
AUM41.97B19.8B
Avg. Return14.59%6.90%
Div. Yield1.2%4.47%
Expense Ratio0.03%0.46%

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 Preferred and Income Securities ETF (PFF) is a Preferred Stock fund that is issued by iShares. It currently has 19.8B total assets under management and has yielded an average annual return of 6.90% over the past 10 years. The fund has a dividend yield of 4.47% with an expense ratio of 0.46%.

ITOT’s dividend yield is 3.27% lower than that of PFF (1.2% vs. 4.47%). Also, ITOT yielded on average 7.69% more per year over the past decade (14.59% vs. 6.90%). The expense ratio of ITOT is 0.43 percentage points lower than PFF’s (0.03% vs. 0.46%).

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Fund Composition

Industry Exposure

ITOT vs. PFF - Industry Exposure

ITOTPFF
Technology24.49%0.0%
Industrials9.21%10.27%
Energy2.51%0.0%
Communication Services10.54%0.0%
Utilities2.35%81.81%
Healthcare13.59%3.54%
Consumer Defensive5.79%0.0%
Real Estate3.67%0.65%
Financial Services13.69%0.0%
Consumer Cyclical11.69%0.0%
Basic Materials2.47%3.74%

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 Preferred and Income Securities ETF (PFF) has the most exposure to the Utilities sector at 81.81%. This is followed by Industrials and Basic Materials at 10.27% and 3.74% respectively. Financial Services (0.0%), Consumer Defensive (0.0%), and Communication Services (0.0%) only make up 0.00% of the fund’s total assets.

PFF’s mid-section with moderate exposure is comprised of Energy, Technology, Real Estate, Healthcare, and Basic Materials stocks at 0.0%, 0.0%, 0.65%, 3.54%, and 3.74%.

ITOT is 24.49% more exposed to the Technology sector than PFF (24.49% vs 0.0%). ITOT’s exposure to Financial Services and Healthcare stocks is 13.69% higher and 10.05% higher respectively (13.69% vs. 0.0% and 13.59% vs. 3.54%). In total, Basic Materials, Energy, and Real Estate also make up 4.26% more of the fund’s holdings compared to PFF (8.65% vs. 4.39%).

Holdings

ITOT - Holdings

ITOT HoldingsWeight
Apple Inc5.07%
Microsoft Corp4.75%
Amazon.com Inc3.16%
Facebook Inc Class A1.89%
Alphabet Inc Class A1.79%
Alphabet Inc Class C1.71%
Tesla Inc1.17%
Berkshire Hathaway Inc Class B1.17%
NVIDIA Corp1.08%
JPMorgan Chase & Co1.02%

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%.

PFF - Holdings

PFF HoldingsWeight
Broadcom Inc Broadcom Inc 8 % Mandatory Convertible Preferred Stock Ser A2.54%
BlackRock Cash Funds Treasury SL Agency2.3%
Wells Fargo & Co 7 1/2 % Non Cum Perp Conv Pfd Shs -A- Series -L-1.79%
Bank of America Corp 7 1/4 % Non-Cum Perp Conv Pfd Shs Series -L-1.49%
ArcelorMittal S.A. 5.5%1.36%
Danaher Corp PRF CONVERT 15/04/2022 USD – Ser A1.35%
Danaher Corp 5% PRF PERPETUAL USD 1000 – Ser B1.14%
NextEra Energy Inc Unit1.12%
Citigroup Capital XIII Floating Rate Trust Pfd Secs Registered 2010-30.10.41.08%
Avantor Inc Ser A0.99%

PFF’s Top Holdings are Broadcom Inc Broadcom Inc 8 % Mandatory Convertible Preferred Stock Ser A, BlackRock Cash Funds Treasury SL Agency, Wells Fargo & Co 7 1/2 % Non Cum Perp Conv Pfd Shs -A- Series -L-, Bank of America Corp 7 1/4 % Non-Cum Perp Conv Pfd Shs Series -L-, and ArcelorMittal S.A. 5.5% at 2.54%, 2.3%, 1.79%, 1.49%, and 1.36%.

Danaher Corp PRF CONVERT 15/04/2022 USD – Ser A (1.35%), Danaher Corp 5% PRF PERPETUAL USD 1000 – Ser B (1.14%), and NextEra Energy Inc Unit (1.12%) have a slightly smaller but still significant weight. Citigroup Capital XIII Floating Rate Trust Pfd Secs Registered 2010-30.10.4 and Avantor Inc Ser A are also represented in the PFF’s holdings at 1.08% and 0.99%.

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Risk Analysis

ITOTPFF
Mean Return1.270.52
R-squared99.49.39
Std. Deviation14.027.87
Alpha-0.543.45
Beta1.030.81
Sharpe Ratio1.040.72
Treynor Ratio14.136.79

The iShares Core S&P Total U.S. Stock Market ETF (ITOT) has a Sharpe Ratio of 1.04 with a Treynor Ratio of 14.13 and a Beta of 1.03. Its Mean Return is 1.27 while ITOT’s Standard Deviation is 14.02. Furthermore, the fund has a Alpha of -0.54 and a R-squared of 99.4.

The iShares Preferred and Income Securities ETF (PFF) has a Alpha of 3.45 with a Sharpe Ratio of 0.72 and a Standard Deviation of 7.87. Its Mean Return is 0.52 while PFF’s Beta is 0.81. Furthermore, the fund has a Treynor Ratio of 6.79 and a R-squared of 9.39.

ITOT’s Mean Return is 0.75 points higher than that of PFF and its R-squared is 90.01 points higher. With a Standard Deviation of 14.02, ITOT is slightly more volatile than PFF. The Alpha and Beta of ITOT are 3.99 points lower and 0.22 points higher than PFF’s Alpha and Beta.

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Performance

Annual Returns

ITOT vs. PFF - Annual Returns

YearITOTPFF
202020.75%7.94%
201930.87%15.62%
2018-5.27%-4.77%
201721.23%8.33%
201612.59%1.26%
20150.96%4.62%
201413.01%13.45%
201332.67%-0.59%
201215.98%18.25%
20111.55%-2.2%
201016.15%13.96%

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 2012 was the strongest year for PFF, returning 18.25% on an annual basis. The poorest year for PFF in the last ten years was 2018, with a yield of -4.77%. Most years the iShares Preferred and Income Securities ETF has given investors modest returns, such as in 2015, 2020, and 2017, when gains were 4.62%, 7.94%, and 8.33% respectively.

Portfolio Growth

ITOT vs. PFF - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
ITOT$10,000$42,31014.59%
PFF$10,000$20,2726.90%

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 PFF, the end total would have been $20,272. This equates to a $10,272 profit over 11 years and a compound annual growth rate (CAGR) of 6.90%.

ITOT’s CAGR is 7.69 percentage points higher than that of PFF and as a result, would have yielded $22,038 more on a $10,000 investment. Thus, ITOT outperformed PFF by 7.69% annually.


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