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ITOT vs. QUAL: What’s The Difference?

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

The expense ratio of ITOT is 0.12 percentage points lower than QUAL’s (0.03% vs. 0.15%). ITOT also has a higher exposure to the technology sector and a higher standard deviation. Overall, ITOT has provided higher returns than QUAL over the past ten years.

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

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Summary

ITOTQUAL
NameiShares Core S&P Total U.S. Stock Market ETFiShares MSCI USA Quality Factor ETF
CategoryLarge BlendLarge Blend
IssueriSharesiShares
AUM41.97B23.93B
Avg. Return14.59%13.42%
Div. Yield1.2%1.29%
Expense Ratio0.03%0.15%

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 USA Quality Factor ETF (QUAL) is a Large Blend fund that is issued by iShares. It currently has 23.93B total assets under management and has yielded an average annual return of 13.42% over the past 10 years. The fund has a dividend yield of 1.29% with an expense ratio of 0.15%.

ITOT’s dividend yield is 0.09% lower than that of QUAL (1.2% vs. 1.29%). Also, ITOT yielded on average 1.17% more per year over the past decade (14.59% vs. 13.42%). The expense ratio of ITOT is 0.12 percentage points lower than QUAL’s (0.03% vs. 0.15%).

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Fund Composition

Industry Exposure

ITOT vs. QUAL - Industry Exposure

ITOTQUAL
Technology24.49%22.52%
Industrials9.21%9.22%
Energy2.51%2.24%
Communication Services10.54%11.44%
Utilities2.35%2.41%
Healthcare13.59%13.22%
Consumer Defensive5.79%8.57%
Real Estate3.67%2.72%
Financial Services13.69%15.87%
Consumer Cyclical11.69%9.43%
Basic Materials2.47%2.35%

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 USA Quality Factor ETF (QUAL) has the most exposure to the Technology sector at 22.52%. This is followed by Financial Services and Healthcare at 15.87% and 13.22% respectively. Basic Materials (2.35%), Utilities (2.41%), and Real Estate (2.72%) only make up 7.48% of the fund’s total assets.

QUAL’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Consumer Cyclical, Communication Services, and Healthcare stocks at 8.57%, 9.22%, 9.43%, 11.44%, and 13.22%.

ITOT is 1.97% more exposed to the Technology sector than QUAL (24.49% vs 22.52%). ITOT’s exposure to Financial Services and Healthcare stocks is 2.18% lower and 0.37% higher respectively (13.69% vs. 15.87% and 13.59% vs. 13.22%). In total, Basic Materials, Energy, and Real Estate also make up 1.34% more of the fund’s holdings compared to QUAL (8.65% vs. 7.31%).

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%.

QUAL - Holdings

QUAL HoldingsWeight
Facebook Inc Class A4.77%
Nike Inc Class B4.05%
Microsoft Corp3.54%
Apple Inc3.52%
Johnson & Johnson2.99%
BlackRock Inc2.87%
Target Corp2.8%
Mastercard Inc Class A2.72%
NVIDIA Corp2.71%
Alphabet Inc Class A2.49%

QUAL’s Top Holdings are Facebook Inc Class A, Nike Inc Class B, Microsoft Corp, Apple Inc, and Johnson & Johnson at 4.77%, 4.05%, 3.54%, 3.52%, and 2.99%.

BlackRock Inc (2.87%), Target Corp (2.8%), and Mastercard Inc Class A (2.72%) have a slightly smaller but still significant weight. NVIDIA Corp and Alphabet Inc Class A are also represented in the QUAL’s holdings at 2.71% and 2.49%.

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Risk Analysis

ITOTQUAL
Mean Return1.270
R-squared99.40
Std. Deviation14.020
Alpha-0.540
Beta1.030
Sharpe Ratio1.040
Treynor Ratio14.130

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

The iShares MSCI USA Quality Factor ETF (QUAL) has a Treynor Ratio of 0 with a Standard Deviation of 0 and a R-squared of 0. Its Beta is 0 while QUAL’s Alpha is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a Mean Return of 0.

ITOT’s Mean Return is 1.27 points higher than that of QUAL and its R-squared is 99.40 points higher. With a Standard Deviation of 14.02, ITOT is slightly more volatile than QUAL. The Alpha and Beta of ITOT are 0.54 points lower and 1.03 points higher than QUAL’s Alpha and Beta.

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Performance

Annual Returns

ITOT vs. QUAL - Annual Returns

YearITOTQUAL
202020.75%16.96%
201930.87%34.14%
2018-5.27%-5.77%
201721.23%22.26%
201612.59%9.18%
20150.96%5.56%
201413.01%11.62%
201332.67%0.0%
201215.98%0.0%
20111.55%0.0%
201016.15%0.0%

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 2019 was the strongest year for QUAL, returning 34.14% on an annual basis. The poorest year for QUAL in the last ten years was 2018, with a yield of -5.77%. Most years the iShares MSCI USA Quality Factor ETF has given investors modest returns, such as in 2010, 2015, and 2016, when gains were 0.0%, 5.56%, and 9.18% respectively.

Portfolio Growth

ITOT vs. QUAL - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
ITOT$10,000$23,31214.59%
QUAL$10,000$23,25113.42%

A $10,000 investment in ITOT would have resulted in a final balance of $23,312. This is a profit of $13,312 over 7 years and amounts to a compound annual growth rate (CAGR) of 14.59%.

With a $10,000 investment in QUAL, the end total would have been $23,251. This equates to a $13,251 profit over 7 years and a compound annual growth rate (CAGR) of 13.42%.

ITOT’s CAGR is 1.17 percentage points higher than that of QUAL and as a result, would have yielded $61 more on a $10,000 investment. Thus, ITOT outperformed QUAL by 1.17% annually.


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