If you’re looking to invest in the U.S. stock market, you might be considering ETFs like SPY and ITOT.
Both of these ETFs track the performance of the U.S. stock market, but there are some key differences between the two that investors should be aware of.
In this article, we’ll take a closer look at SPY vs ITOT and help you understand the similarities and differences between these popular ETFs.
Understanding SPY and ITOT SPY, or the SPDR S&P 500 ETF, is one of the most popular ETFs on the market. It tracks the performance of the S&P 500 index, which includes 500 of the largest publicly traded companies in the U.S. ITOT, or the iShares Core S&P Total U.S. Stock Market ETF, tracks the performance of the entire U.S. stock market, including small-cap and mid-cap companies in addition to large-cap companies.
Comparative Analysis of SPY and ITOT When comparing SPY vs ITOT, there are a few key factors to consider. One of the biggest differences between the two is their expense ratios. SPY has an expense ratio of 0.09%, while ITOT’s expense ratio is just 0.03%. This means that ITOT is significantly cheaper to own than SPY. Another important factor to consider is the composition of each ETF’s portfolio. While SPY focuses solely on the S&P 500, ITOT includes a much broader range of companies. This means that ITOT may offer greater diversification than SPY, but it also means that it may be more susceptible to market volatility.
Key Takeaways SPY vs ITOT
- SPY and ITOT are both ETFs that track the performance of the U.S. stock market.
- SPY tracks the S&P 500, while ITOT tracks the entire U.S. stock market.
- ITOT is cheaper to own than SPY, but may be more volatile due to its broader portfolio composition.
Understanding SPY vs ITOT
Fund Issuers and Overview SPY vs ITOT
When it comes to investing in the US stock market, two popular choices are SPY and ITOT. SPY, or SPDR S&P 500 ETF Trust, is issued by State Street Global Advisors, while ITOT, or iShares Core S&P Total U.S. Stock Market ETF, is issued by BlackRock. Both funds are designed to provide investors with exposure to the US stock market, but they differ in some key ways.
SPY is one of the oldest and most popular ETFs, with a history dating back to 1993. It tracks the S&P 500 Index, which is widely regarded as a benchmark for the US stock market. The S&P 500 Index is made up of 500 large-cap stocks listed on US exchanges. SPY has an expense ratio of 0.09%, which is relatively low compared to other actively managed funds.
ITOT, on the other hand, tracks the S&P Composite 1500 Index. This index includes not only the 500 stocks in the S&P 500 but also mid-cap and small-cap stocks. As a result, ITOT provides investors with exposure to a broader range of US stocks than SPY. ITOT has a lower expense ratio than SPY, at 0.03%.
Underlying Indexes
The S&P 500 Index and the S&P Composite 1500 Index are both market-cap-weighted indexes, which means that the weight of each stock in the index is determined by its market capitalization. This means that larger companies have a greater impact on the index than smaller companies.
The S&P 500 Index is widely regarded as a benchmark for the US stock market because it includes many of the largest and most well-known companies in the US. Some of the top holdings in SPY include Apple, Microsoft, and Amazon.
The S&P Composite 1500 Index, on the other hand, includes not only large-cap stocks but also mid-cap and small-cap stocks. This means that ITOT provides investors with exposure to a broader range of companies than SPY. Some of the top holdings in ITOT include Apple, Microsoft, and Amazon, but it also includes smaller companies like Zebra Technologies and Enphase Energy.
Investment Objectives
Both SPY and ITOT are designed to provide investors with exposure to the US stock market, but they have different investment objectives. SPY is designed to track the performance of the S&P 500 Index, which means that it is focused on large-cap stocks. ITOT, on the other hand, is designed to track the performance of the S&P Composite 1500 Index, which includes mid-cap and small-cap stocks as well as large-cap stocks.
Investors who are looking for exposure to the US stock market but want to focus on large-cap stocks may prefer SPY. On the other hand, investors who want exposure to a broader range of US stocks, including mid-cap and small-cap stocks, may prefer ITOT.
In summary, SPY and ITOT are both popular ETFs that provide investors with exposure to the US stock market. While they have some similarities, they differ in their underlying indexes and investment objectives. Investors should carefully consider their investment goals and risk tolerance before choosing between these two ETFs.
Comparative Analysis of SPY and ITOT
When it comes to choosing between SPY and ITOT, it is important to consider several factors to make an informed decision. Here is a comparative analysis of SPY and ITOT based on their expense ratio, performance, dividend yield, and payouts.
Expense Ratio Comparison
Expense ratio is one of the most important factors to consider when choosing between two ETFs. SPY has an expense ratio of 0.09%, while ITOT has an expense ratio of 0.03%. This means that ITOT is cheaper to hold than SPY.
Performance Comparison
Performance is another important factor to consider when choosing between two ETFs. Over the past 1 year, SPY has returned 27.66%, while ITOT has returned 28.02%. Over the past 3 years, SPY has returned 17.13% (annually), while ITOT has returned 17.46% (annually). Over the past 5 years, SPY has returned 16.35% (annually), while ITOT has returned 16.69% (annually). Over the past 10 years, SPY has returned 11.87% (annually), while ITOT has returned 11.43% (annually).
Dividend Yield and Payouts
Dividend yield and payouts are important factors to consider for investors who are looking for regular income from their investments. SPY has a dividend yield of 1.21%, while ITOT has a dividend yield of 1.28%. SPY pays dividends quarterly, while ITOT pays dividends quarterly as well.
In summary, when it comes to choosing between SPY and ITOT, you should consider the expense ratio, performance, dividend yield, and payouts. ITOT is cheaper to hold than SPY, and has had slightly better performance over the past year, 3 years, and 5 years. However, SPY has a higher dividend yield than ITOT. Ultimately, the choice between SPY and ITOT depends on your individual investment goals and risk tolerance.
Portfolio Composition and Diversification
When it comes to building a diversified portfolio, it’s important to consider the composition of the ETFs you’re investing in. In this section, we’ll take a closer look at the portfolio composition and diversification of SPY and ITOT.
Sector Allocations
Both SPY and ITOT provide exposure to a broad range of sectors. However, there are some differences in their sector allocations. SPY has a higher allocation to Information Technology, with Apple and Microsoft being its top holdings. On the other hand, ITOT has a more balanced sector allocation, with no single sector accounting for more than 20% of its holdings. Therefore, if you’re looking for more exposure to tech companies, SPY might be a better choice for you.
Market Capitalizations
Another important factor to consider when building a diversified portfolio is market capitalization. SPY is designed to track the S&P 500, which is made up of large-cap companies. Therefore, SPY has a higher allocation to large-cap companies compared to ITOT. ITOT, on the other hand, provides exposure to mid-cap, small-cap, and micro-cap companies, in addition to large-cap companies. This makes ITOT a better choice if you’re looking for exposure to smaller companies.
Top Holdings
The top holdings of an ETF can also give you an idea of its portfolio composition. SPY’s top holdings include some of the largest companies in the world, such as Apple, Microsoft, and Amazon. ITOT’s top holdings, on the other hand, include a mix of large-cap, mid-cap, and small-cap companies. Therefore, if you’re looking for exposure to a diverse range of companies, ITOT might be a better choice for you.
In conclusion, when it comes to portfolio composition and diversification, both SPY and ITOT have their strengths and weaknesses. SPY provides exposure to large-cap tech companies, while ITOT provides exposure to a more balanced mix of sectors and market capitalizations. Ultimately, the choice between these two ETFs will depend on your investment goals and risk tolerance.
Risk and Performance Metrics
When comparing ETFs, it is important to consider various risk and performance metrics. In this section, we will compare SPY and ITOT using metrics such as volatility, Sharpe ratio, maximum drawdown, and correlation.
Volatility and Standard Deviation
Volatility is a measure of an investment’s risk. It is the degree of variation of an investment’s returns over time. The standard deviation is a statistical measure that represents the degree of variation of an investment’s returns from its average. In terms of daily standard deviation, SPY has a slightly higher value of 1.21% compared to ITOT’s 1.20%. This indicates that SPY is slightly more volatile than ITOT.
Sharpe Ratio and Risk-Adjusted Returns
The Sharpe ratio is a measure of an investment’s risk-adjusted returns. It is calculated by dividing the excess return of an investment over the risk-free rate by its standard deviation. A higher Sharpe ratio indicates better risk-adjusted returns. According to ETF Database, ITOT has a higher Sharpe ratio of 1.02 compared to SPY’s 0.99. This suggests that ITOT provides better risk-adjusted returns than SPY.
Maximum Drawdown and Correlation
Maximum drawdown is the maximum loss from a peak to a trough of an investment. Correlation is a statistical measure that represents the degree of association between two investments. In terms of maximum drawdown, SPY has a lower value of -33.79% compared to ITOT’s -34.77%. This indicates that SPY has experienced lower losses during market downturns. In terms of correlation, SPY and ITOT have a high correlation of 0.99. This indicates that both ETFs move in a similar direction, making them suitable for diversification purposes.
In summary, when comparing SPY and ITOT using various risk and performance metrics, ITOT appears to provide better risk-adjusted returns and has a slightly lower volatility compared to SPY. However, SPY has experienced lower losses during market downturns and has a high correlation with ITOT, making it suitable for diversification purposes.
Investor Considerations
When deciding between SPY and ITOT, there are several factors to consider to ensure that you make an informed investment decision. Here are some key considerations to keep in mind:
Investment Suitability
Before investing in either SPY or ITOT, it’s important to assess whether either ETF is suitable for your investment goals and risk tolerance. SPY is an ETF that tracks the S&P 500 index, which includes 500 large-cap U.S. stocks. On the other hand, ITOT is an ETF that tracks the total U.S. stock market, which includes small, mid, and large-cap U.S. stocks. If you prefer a more diversified portfolio, ITOT may be a better option for you. However, if you’re looking for exposure to large-cap U.S. stocks, SPY may be a better fit.
Liquidity and Trading Volume
Another important consideration is the liquidity and trading volume of each ETF. SPY is one of the most heavily traded ETFs in the market, with an average daily trading volume of over 50 million shares. ITOT also has a high trading volume, with an average daily volume of over 1 million shares. Both ETFs have tight bid-ask spreads, which means that they are easy to buy and sell. However, if you’re planning to trade large volumes, SPY may be a better option due to its higher liquidity.
Future Outlook and Potential
When making an investment decision, it’s important to consider the future outlook and potential of each ETF. While past performance is not indicative of future results, it can provide some insight into how each ETF may perform in the future. Over the past 10 years, SPY has provided a higher return than ITOT. However, this does not guarantee that SPY will continue to outperform ITOT in the future. It’s important to conduct your own research and analysis to determine which ETF has the potential to provide the best returns for your investment goals.
In summary, when deciding between SPY and ITOT, it’s important to consider your investment suitability, the liquidity and trading volume of each ETF, and the future outlook and potential of each ETF. By taking these factors into account, you can make an informed investment decision that aligns with your investment goals and risk tolerance.
