Choosing Between VTI and ITOT for Long-Term Total Market Exposure: A Strategic Analysis of Diversification, Liquidity, and AUM

In the realm of long-term investing, the pursuit of broad market exposure often hinges on the nuanced interplay of diversification, liquidity, and scale. Two exchange-traded funds (ETFs) that dominate this space-Vanguard Total Stock Market ETF (VTI) and iShares Core S&P Total U.S. Stock Market ETF (ITOT)-offer nearly identical expense ratios and performance profiles. Yet, their structural differences in assets under management (AUM), holdings, and liquidity metrics reveal critical distinctions that merit closer scrutiny. For investors prioritizing portfolio stability and operational efficiency, these factors can tilt the balance decisively toward one option over the other.

Diversification: Breadth vs. Precision

Both VTI and ITOT aim to capture the U.S. equity market, but their index methodologies diverge in subtle yet significant ways. VTI tracks the CRSP US Total Market Index, encompassing approximately 3,598 stocks, including micro-cap companies. In contrast, ITOT follows the S&P Total Market Index, which includes around 2,497 stocks but excludes micro-cap firms according to data. This distinction means VTI offers marginally broader diversification, particularly in the lower end of the market capitalization spectrum. For investors seeking to minimize idiosyncratic risk, this expanded coverage can enhance resilience during sector-specific downturns.

Liquidity: The Unseen Pillar of Efficiency

Liquidity, often overlooked in favor of cost or returns, is a cornerstone of portfolio efficiency. As of 2025, VTI's AUM exceeds $560 billion, dwarfing ITOT's $79.96 billion. This disparity translates into superior liquidity, enabling smoother execution of trades-especially for larger orders. During periods of market stress, such as the volatility observed on April 21, 2025, VTI's bid-ask spread widened to 0.56%, compared to ITOT's 2.15%. While both ETFs typically maintain tight spreads under normal conditions, VTI's larger size provides a buffer against liquidity shocks, ensuring more predictable trade execution.

AUM: Scale as a Proxy for Stability

Assets under management are not merely a measure of popularity; they reflect an ETF's capacity to absorb market shocks and maintain structural integrity. VTI's dominance in AUM-over seven times that of ITOT-underscores its role as a market benchmark. Larger AUM correlates with deeper liquidity, narrower spreads, and greater institutional confidence. For long-term investors, this scale reduces the risk of operational disruptions, such as tracking errors or sudden liquidity constraints, which can erode returns over time.

Cost and Performance: A Near-Tie

Both ETFs charge an expense ratio of 0.03%, and their historical returns have been nearly indistinguishable according to research. However, cost parity does not negate the advantages of structural superiority. Investors must recognize that while fees are a critical input, they are not the sole determinant of long-term success. The compounding benefits of superior liquidity and diversification-both inherent in VTI-can outweigh marginal cost differences, particularly in volatile environments.

Conclusion: A Case for VTI

For most investors, the choice between VTI and ITOT ultimately hinges on the trade-off between marginal cost savings and structural advantages. While ITOT may appeal to those prioritizing simplicity or familiarity with the S&P index, VTI's broader market coverage, deeper liquidity, and larger AUM position it as the more robust option for long-term portfolio stability. In an era marked by macroeconomic uncertainty and market fragmentation, the incremental benefits of VTI's scale and diversification are not merely advantageous-they are essential.