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SPY vs. VTI: What’s The Difference?

If you are anything like me you probably spend the past weeks and months researching which ETF to buy for your portfolio: Vanguard Total Stock Market ETF or SPDR S&P 500 ETF Trust.  Both of these ETFs seem to offer long-term sustainable growth and would make a good core of your portfolio. So I did some research to figure what the differences between SPY and VTI are.

With a compound annual growth rate (CAGR) of 9.08% VTI outperforms SPY with a CAGR of 8.43% by a small margin. However, VTI is also slightly more volatile than SPY and experienced a maximum drawdown of -50.84% in the past 30 years.

In this article, In this article, we’ll go over the key differences between SPY and VTI. We’ll look at the investment objectives, the fund composition, the exposure to different industries as well as tradability.

In the analysis part, we’ll look at some key metrics and the risk associated with each ETF.  And most importantly, of course, I will analyze the historical performance and returns of both VTI and SPY.

SPY vs. VTI: What’s The Difference?

Net Assets840.92B262.09B
YTD Daily Total Return-26.62%-25.02%
Beta (5Y Monthly)1.021
Expense Ratio (net)0.03%0.09%
Inception Date5/24/20011/22/1993

Important key factors to look at here are the net assets as well as the current yield, the expense ratio, and of course the inception date. Those numbers will tell us the basic structure of the ETF and will enable us to build our analysis from there.

  • Net Assets: When comparing the net assets of VTI and SPY we can see that VTI’s assets are about three times those of SPY. Under certain circumstances, the net assets in a fund can be a determining factor when it comes to tradability. However, in this case, the net assets of both index funds exceed 100 billion dollars and tradability will not be an issue for the average investor with either fund.
  • Yield: VTI currently has a yield of 1.93% and SPY has a yield of 1.9%. In terms of yield, both ETFs will perform fairly similarly as their composition does not differ significantly either.
  • Expense Ratio: Regarding the expense ratio however there is a significant difference between both funds: VTI has an expense ratio of 0.03% and SPY, on the other hand, has an expense ratio of 0.09%. While even 0.09% is still relatively low this difference in fees can add up over time. This means that you would pay $3 in fees for a $10,000 investment in VTI and $9 in fees for a $10,000 investment in its SPY. Nonetheless, this should not be the only determining factor when deciding which ETF to invest in.
  • Inception Date: When it comes to the inception date of both index funds we can see that SPY was founded in 1993 and has a much longer track record compared to VTI which was founded in 2001 which can play a key role when analyzing historical returns. As a rule of thumb: the more data and the longer that data dates back, the better!

Investment Objectives

Both ETFs I have similar investment objectives and are geared towards a homogeneous group of investors. The objective any investor considering VTI or SPY should have in mind is a long-term well-diversified strategy.

Fund Composition

VTI tracks the entire US Stock Market which is why it will include a long tail of small to very small market cap stocks. However, the percentage of those small market cap companies compared to mid-cap and large-cap stocks is fairly small. In fact, small-cap stocks only make up around 6% of the fund’s total composition.

We will later see if this additional diversification provides a higher risk tolerance in terms of maximum drawdowns and a better overall long-term performance.

VTI vs SPY - Which ETF Should You Buy?

VTI Capitalization

SPY tracks the S&P 500 index which includes the 500 largest cap companies in the United States. As a result, no small-cap companies are included in the fund and large-cap stocks take up almost 90% of net assets. Small-Cap stocks are not included. Mid Cap stocks make up around 10% of assets.

VTI vs SPY - Which ETF Should You Buy?

SPY Capitalization

Industry Exposure

The Vanguard Total Stock Market ETF is composed of up to 20% of technology companies followed by financial services and health care. utilities, energy, and real estate as well as basic materials makeup a significantly lesser portion of holdings. This industry exposure represents the composition of the entire stock market.

Thus, by investing in vti you will not only reap the benefits of fast-growing tech companies but also the slow and steady dividend appreciation of utility companies and other Healthcare and raw materials stocks.

VTI Equity Sectors

VTI vs SPY - Which ETF Should You Buy?

The SPDR S&P 500 ETF Trust is exposed to pretty much the same distribution of industries as any other total Stock Market ETF. The only real difference is that this ETF is a little more tech-heavy in its composition with technology companies representing closer to 22% of total assets.

Nonetheless, the broad exposure to industries of all types allows you to build your portfolio by diversifying across all U.S. industries with a single fund. This advantage applies to both the VTI and SPY ETF as compared here.

SPY Equity Sectors

VTI vs SPY - Which ETF Should You Buy?

SPY vs. VTI: Analysis

Next we will take a look at some key financial metrics to assess the overall risk of VTI vs SPY.

Key Metrics

Volatility (monthly)4.16%4.05%
Volatility (annualized)14.41%14.03%
Downside Deviation (monthly)2.87%2.80%
Max. Drawdown-50.84%-50.80%
US Market Correlation1.001.00
SPY vs. VTI: Risk Metrics

When looking at some of the key financial metrics it is unsurprising that both ETFs show very similar numbers. This is due to their very similar composition and is even more clearly reflected in the u.s. market correlation of 1.00.

However, I do want to highlight the difference in volatility and maximum drawdown. With 4.16% monthly volatility and 14.41% annualized volatility VTI is slightly more volatile than SPY. And while SPY’s maximum drawdown is -50.80%, VTI’s drawdown it’s slightly higher as well.

This is most likely due to the fact that VTI includes many small-cap companies that tend to either grow at a faster pace or go bankrupt more easily and frequently than larger-cap companies.

This following chart visualizes the slight difference in drawdowns both of these funds – VTI (Blue) and SPY (Red) – experience:

image 4
SPY vs. VTI – Drawdowns

Other than that these financial metrics reflect those of the entire US Stock Market.

SPY vs. VTI: Performance

Finally let’s take a look at one of the most important factors determining which fund you should buy: VTI or SPY.

This factor is of course the fund’s performance and returns. In order to accurately compare their performance, I have compared their annual returns on a year-by-year basis as well as back-tested the hypothetical growth of 10,000 US Dollars over the lifetime of the funds.

First, let’s take a look at the historical annual return of each fund.

Annual Returns

image 3
SPY vs. VTI – Annual Returns

As expected the annual returns for both funds look quite similar as well. What is noteworthy here is that in years that yielded positive returns VTI seemed to outperform SPY slightly. On the other hand, years that resulted in a loss were generally managed a bit better by SPY.

This alludes back to the point I made earlier about the increased volatility and risk of small and very small cap companies: in years with positive returns smaller companies tend to grow exponentially while in economic downturns they tend to be far less stable as they have less capital available to make it through uncertain times.

Portfolio Growth

Now on to my favorite part: actually backtesting each fund’s performance over their entire lifetime. This following chart shows the hypothetical growth of 10,000 USD if invested in 2002:

image 2
SPY vs. VTI – Portfolio Growth

At the beginning of the new millennium, both index funds experience a similar growth but soon after VTI takes a slight lead. In the crash of 2008/2009 the gains and losses of VTI and SPY balance out at a new low. The following bull market up until early 2020 however, shows the strength of Vanguard’s fund: the over-performance of small-cap companies in boom times!

Overall an investment of $10,000 in VTI in 2002 would have resulted in around $43,000 in early 2020. A $10,000 investment in SPY in 2002 on the other hand would have resulted in $40,000 by 2020. In terms of overall returns, VTI clearly outperforms SPY.


So, now that we have compared key facts, financial metrics, risk profiles, and overall returns: which ETF should you actually, VTI or SPY?

The basic takeaway from this comparison should definitely be: either!
And since all your investment decision should be based on a long-term growth approach either one of these funds will be a value-add to your portfolio in the long term.

Personally, I prefer VTI for its exposure to small market cap companies which can accelerate growth in strong bull markets. However, this is simply a personal preference. Judging from the return of the past 18 years this preference indicates a slight edge over SPY.

Always keep in mind that historical performance does not guarantee future successes as well as the fact – due to the younger inception date of VTI – we did not compare returns before 2002.

So, what do you think? Which of these funds are you going to buy?

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