If you’re looking to invest in the stock market, you may have come across VTI vs DFAC.
Both VTI and DFAC are exchange-traded funds (ETFs) that track the performance of the U.S. stock market.
While they have some similarities, there are also some key differences between the two funds that you should consider before investing.
VTI, or the Vanguard Total Stock Market ETF, is one of the most popular ETFs on the market. It tracks the performance of the CRSP US Total Market Index, which includes stocks of all sizes from across the U.S. stock market. DFAC, or the Dimensional U.S. Core Equity 2 ETF, also tracks the U.S. stock market, but it uses a different investment strategy than VTI.
Understanding the differences between VTI and DFAC can help you make an informed decision about which ETF is right for you. In the following sections, we’ll take a closer look at the investment strategy and holdings, performance metrics, costs and tax considerations, and other factors you should consider when choosing between VTI and DFAC.
Key Takeaways VTI vs DFAC
- VTI and DFAC are both ETFs that track the performance of the U.S. stock market, but they use different investment strategies.
- VTI tracks the CRSP US Total Market Index and includes stocks of all sizes, while DFAC uses a different investment strategy that tilts towards certain factors.
- When choosing between VTI and DFAC, you should consider factors such as performance metrics, costs and tax considerations, and your own investment strategy and goals.
Understanding VTI vs DFAC
If you’re interested in investing in the U.S. stock market, you may have come across two popular ETFs: Vanguard Total Stock Market ETF (VTI) and Dimensional U.S. Core Equity 2 ETF (DFAC). Here’s what you need to know about these two investment options.
Vanguard Total Stock Market ETF (VTI)
VTI, managed by Vanguard, is one of the largest ETFs in the market, with over $1 trillion in assets under management. It tracks the performance of the CRSP US Total Market Index, which includes over 3,500 stocks representing the entire U.S. stock market. VTI seeks to provide investors with exposure to the entire U.S. stock market, including small, mid, and large-cap stocks.
VTI has a low expense ratio of 0.03%, making it an attractive option for investors looking for a low-cost way to invest in the U.S. stock market. Additionally, VTI has a solid track record of performance, with an average annual return of 10.53% over the past 10 years.
Dimensional U.S. Core Equity 2 ETF (DFAC)
DFAC, managed by Dimensional Fund Advisors, seeks to provide investors with exposure to U.S. core equity. It tracks the performance of the Dimensional U.S. Core Equity 2 Index, which includes over 1,500 stocks representing the U.S. stock market, excluding micro-cap stocks.
DFAC has a slightly higher expense ratio of 0.19% compared to VTI, but it also has a unique investment strategy that focuses on small-cap and value stocks. DFAC’s investment strategy is based on academic research that suggests that small-cap and value stocks have higher expected returns over the long term.
In terms of performance, DFAC has provided an average annual return of 10.01% over the past 10 years, slightly lower than VTI’s return.
In summary, VTI and DFAC are two popular ETFs that provide investors with exposure to the U.S. stock market. VTI is a low-cost option that tracks the entire U.S. stock market, while DFAC has a unique investment strategy that focuses on small-cap and value stocks. When choosing between these two ETFs, it’s important to consider your investment goals and risk tolerance.
Investment Strategy and Holdings VTI vs DFAC
When it comes to investment strategy and holdings, VTI and DFAC have some similarities and differences. In this section, we will take a closer look at the portfolio composition and top holdings of these two ETFs.
Portfolio Composition
VTI is designed to track the performance of the CRSP US Total Market Index, which includes more than 3,500 stocks of varying sizes. The ETF is well-diversified across sectors, with the largest holdings in Information Technology, Health Care, and Consumer Discretionary. As of November 30, 2023, VTI had a total net asset value of $2.3 trillion.
DFAC, on the other hand, aims to provide exposure to U.S. large-cap equities by investing in securities of companies in the Dimensional U.S. Core Equity 2 Index. The ETF follows an active strategy that emphasizes factors such as profitability, relative price, and small size. DFAC has a total net asset value of $1.9 billion as of November 30, 2023.
Top Holdings Analysis
When it comes to top holdings, both VTI and DFAC have some overlap. Apple Inc is the largest holding in both ETFs, with a weight of 6.1% in VTI and 4.2% in DFAC. Microsoft Corp, Amazon.com Inc, and Nvidia Corp also appear in the top 10 holdings of both ETFs.
In addition to these companies, DFAC also has significant exposure to Berkshire Hathaway Inc Class B and Meta Platforms Inc, which are not included in VTI’s top holdings. Exxon Mobil Corp and Alphabet Inc, which are among VTI’s top holdings, are not represented in DFAC’s portfolio.
Overall, VTI and DFAC have different investment strategies and portfolio compositions, which may appeal to different types of investors. VTI offers broad exposure to the entire U.S. equity market, while DFAC takes a more targeted approach to large-cap equities. When choosing between these ETFs, it’s important to consider your investment goals and risk tolerance to determine which one is right for you.
Performance Metrics
Historical Performance Comparison
When comparing VTI and DFAC, it is important to look at their historical performance. According to Finance Charts, VTI has provided higher returns than DFAC over the past ten years. However, past performance does not guarantee future results. It is important to keep in mind that the market is constantly changing, and what worked in the past may not work in the future.
Dividends and Yield
Another important factor to consider when comparing VTI and DFAC is their dividends and dividend yield. According to PortfoliosLab, VTI has a higher dividend yield than DFAC. However, it is important to keep in mind that dividends are not guaranteed and can be cut or eliminated at any time.
Risk-Adjusted Returns
When evaluating the performance of VTI and DFAC, it is important to consider risk-adjusted returns. One way to do this is by looking at the Sharpe ratio, which measures the excess return per unit of risk. According to ETF.com, VTI has a higher Sharpe ratio than DFAC. Another way to evaluate risk-adjusted returns is by looking at the RS rating, which measures a fund’s risk-adjusted returns relative to its peers. However, it is important to keep in mind that past performance does not guarantee future results and that there is no guarantee that a fund with a higher Sharpe ratio or RS rating will outperform its peers in the future.
When comparing VTI and DFAC, it is important to consider all of these factors and to make an informed decision based on your investment goals and risk tolerance.
Costs and Tax Considerations
Expense Ratios
When comparing VTI and DFAC, it is important to consider their expense ratios. VTI has a lower expense ratio of 0.03% compared to DFAC’s 0.17%. This means that VTI is the more cost-effective option. However, it is important to note that expense ratios are not the only factor to consider when choosing between these two ETFs.
Tax Efficiency
Another important factor to consider is tax efficiency. Both VTI and DFAC are tax efficient, but DFAC may be more tax efficient in certain situations. This is because DFAC is structured as a separate account, which allows investors to avoid paying taxes on the gains of other investors in the same fund. However, this structure also means that investors must hold DFAC for at least one year to be eligible for long-term capital gains tax rates.
When it comes to federal income tax implications, both VTI and DFAC are subject to the same tax rules. Investors must pay taxes on any dividends received from the ETFs, as well as any capital gains realized when selling shares. It is important to consult with a tax advisor to determine the best tax strategy for your individual situation.
In summary, when considering costs and tax implications, VTI may be the more cost-effective option due to its lower expense ratio. However, DFAC’s structure as a separate account may make it more tax efficient in certain situations. It is important to weigh both factors when choosing between these two ETFs.
Investor Considerations
When deciding between VTI and DFAC, there are a few investor considerations to keep in mind. These considerations include your investment decisions and timing, as well as your market entry and exit strategies.
Investment Decisions and Timing
When it comes to investment decisions, it’s important to consider your long-term investment goals. If you’re looking for a low-cost, diversified investment option, VTI may be a better choice. With an expense ratio of only 0.03%, VTI is one of the lowest cost ETFs on the market.
On the other hand, if you’re looking for a tax-efficient investment option, DFAC may be a better choice. DFAC takes into account federal income tax implications when making investment decisions, which can help reduce your tax liability.
Timing is also an important factor to consider when making investment decisions. It’s important to remember that past performance is not a guarantee of future results. While VTI has provided higher returns than DFAC over the past ten years, this may not necessarily continue in the future.
Market Entry and Exit Strategies
When it comes to market entry and exit strategies, it’s important to have a plan in place. This can help you avoid making emotional decisions based on short-term market fluctuations.
If you’re considering buying either VTI or DFAC, it’s important to have a clear understanding of your investment goals and risk tolerance. It’s also important to consider the current market conditions and any potential risks or uncertainties.
If you’re considering selling either VTI or DFAC, it’s important to have a clear exit strategy in place. This can help you avoid making emotional decisions based on short-term market fluctuations. It’s also important to consider any tax implications of selling your investment.
In summary, when deciding between VTI and DFAC, it’s important to consider your long-term investment goals, as well as your market entry and exit strategies. By carefully considering these factors, you can make an informed decision that is right for you.
