The Vanguard Total Stock Market Index Fund ETF Shares (VTI) and the iShares Russell 2000 ETF (IWM) are both among the Top 100 ETFs. VTI is a Vanguard Large Blend fund and IWM is a iShares Small Blend fund. So, what’s the difference between VTI and IWM? And which fund is better?
The expense ratio of VTI is 0.16 percentage points lower than IWM’s (0.03% vs. 0.19%). VTI also has a higher exposure to the technology sector and a lower standard deviation. Overall, VTI has provided higher returns than IWM over the past ten years.
In this article, we’ll compare VTI vs. IWM. We’ll look at risk metrics and holdings, as well as at their portfolio growth and annual returns. Moreover, I’ll also discuss VTI’s and IWM’s industry exposure, fund composition, and performance and examine how these affect their overall returns.
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|Name||Vanguard Total Stock Market Index Fund ETF Shares||iShares Russell 2000 ETF|
|Category||Large Blend||Small Blend|
The Vanguard Total Stock Market Index Fund ETF Shares (VTI) is a Large Blend fund that is issued by Vanguard. It currently has 1.26T total assets under management and has yielded an average annual return of 14.70% over the past 10 years. The fund has a dividend yield of 1.26% with an expense ratio of 0.03%.
The iShares Russell 2000 ETF (IWM) is a Small Blend fund that is issued by iShares. It currently has 66.48B total assets under management and has yielded an average annual return of 13.52% over the past 10 years. The fund has a dividend yield of 0.86% with an expense ratio of 0.19%.
VTI’s dividend yield is 0.40% higher than that of IWM (1.26% vs. 0.86%). Also, VTI yielded on average 1.18% more per year over the past decade (14.70% vs. 13.52%). The expense ratio of VTI is 0.16 percentage points lower than IWM’s (0.03% vs. 0.19%).
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The Vanguard Total Stock Market Index Fund ETF Shares (VTI) has the most exposure to the Technology sector at 24.1%. This is followed by Financial Services and Healthcare at 13.77% and 13.64% respectively. Basic Materials (2.44%), Energy (2.77%), and Real Estate (3.59%) only make up 8.80% of the fund’s total assets.
VTI’s mid-section with moderate exposure is comprised of Consumer Defensive, Industrials, Communication Services, Consumer Cyclical, and Healthcare stocks at 5.77%, 9.39%, 10.4%, 11.83%, and 13.64%.
The iShares Russell 2000 ETF (IWM) has the most exposure to the Healthcare sector at 20.3%. This is followed by Industrials and Technology at 14.78% and 14.21% respectively. Consumer Defensive (3.65%), Basic Materials (3.74%), and Energy (3.74%) only make up 11.13% of the fund’s total assets.
IWM’s mid-section with moderate exposure is comprised of Communication Services, Real Estate, Consumer Cyclical, Financial Services, and Technology stocks at 3.79%, 8.59%, 10.99%, 13.76%, and 14.21%.
VTI is 9.89% more exposed to the Technology sector than IWM (24.1% vs 14.21%). VTI’s exposure to Financial Services and Healthcare stocks is 0.01% higher and 6.66% lower respectively (13.77% vs. 13.76% and 13.64% vs. 20.3%). In total, Basic Materials, Energy, and Real Estate also make up 7.27% less of the fund’s holdings compared to IWM (8.80% vs. 16.07%).
|Facebook Inc Class A||1.88%|
|Alphabet Inc Class A||1.66%|
|Alphabet Inc Class C||1.56%|
|Berkshire Hathaway Inc Class B||1.09%|
|JPMorgan Chase & Co||1.06%|
VTI’s Top Holdings are Apple Inc, Microsoft Corp, Amazon.com Inc, Facebook Inc Class A, and Alphabet Inc Class A at 4.9%, 4.6%, 3.33%, 1.88%, and 1.66%.
Alphabet Inc Class C (1.56%), Tesla Inc (1.18%), and Berkshire Hathaway Inc Class B (1.09%) have a slightly smaller but still significant weight. NVIDIA Corp and JPMorgan Chase & Co are also represented in the VTI’s holdings at 1.07% and 1.06%.
|AMC Entertainment Holdings Inc Class A||0.52%|
|Intellia Therapeutics Inc||0.33%|
|BlackRock Cash Funds Treasury SL Agency||0.29%|
|Tenet Healthcare Corp||0.26%|
|Lattice Semiconductor Corp||0.26%|
|Tetra Tech Inc||0.25%|
|EastGroup Properties Inc||0.24%|
|Arrowhead Pharmaceuticals Inc||0.24%|
IWM’s Top Holdings are AMC Entertainment Holdings Inc Class A, Intellia Therapeutics Inc, Crocs Inc, BlackRock Cash Funds Treasury SL Agency, and Tenet Healthcare Corp at 0.52%, 0.33%, 0.3%, 0.29%, and 0.26%.
Lattice Semiconductor Corp (0.26%), Tetra Tech Inc (0.25%), and II-VI Inc (0.25%) have a slightly smaller but still significant weight. EastGroup Properties Inc and Arrowhead Pharmaceuticals Inc are also represented in the IWM’s holdings at 0.24% and 0.24%.
VTI had its best year in 2013 with an annual return of 33.51%. VTI’s worst year over the past decade yielded -5.13% and occurred in 2018. In most years the Vanguard Total Stock Market Index Fund ETF Shares provided moderate returns such as in 2016, 2012, and 2010 where annual returns amounted to 12.68%, 16.41%, and 17.26% respectively.
The year 2013 was the strongest year for IWM, returning 38.85% on an annual basis. The poorest year for IWM in the last ten years was 2018, with a yield of -11.02%. Most years the iShares Russell 2000 ETF has given investors modest returns, such as in 2017, 2012, and 2020, when gains were 14.66%, 16.39%, and 19.89% respectively.
|Fund||Initial Balance||Final Balance||CAGR|
A $10,000 investment in VTI would have resulted in a final balance of $42,648. This is a profit of $32,648 over 11 years and amounts to a compound annual growth rate (CAGR) of 14.70%.
With a $10,000 investment in IWM, the end total would have been $36,686. This equates to a $26,686 profit over 11 years and a compound annual growth rate (CAGR) of 13.52%.
VTI’s CAGR is 1.18 percentage points higher than that of IWM and as a result, would have yielded $5,962 more on a $10,000 investment. Thus, VTI outperformed IWM by 1.18% annually.
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