VTI vs. ITOT: A Historical Test of the Market's Core Holding

For a long-term investor, the choice between the Vanguard Total Stock Market ETF (VTI) and the iShares Core S&P Total U.S. Stock Market ETF (ITOT) comes down to a single, quantifiable advantage. Both funds are built on the same fundamental principle: to provide low-cost, diversified exposure to the entire U.S. equity market. Their core metrics are functionally identical. They charge the identical 0.03% annual expense ratio, ensuring that fees will not be a differentiator. Their performance and risk profiles are nearly indistinguishable, with nearly identical betas of 1.04 and max drawdowns of -25.35% and -25.36% over the past five years. Total returns over five years are also virtually the same, with $1,000 growing to $1,730 in ITOT and $1,728 in VTI.

The primary differentiator is scale. VTI's $567 billion in assets under management (AUM) dwarfs ITOT's $80 billion. This vast difference in size translates directly into greater liquidity for large trades. With a much higher average daily trading volume, VTI can absorb larger purchase and sale orders with less price impact, a crucial advantage for institutional investors or those making significant portfolio allocations. While the average investor may not feel this difference in a small, regular investment, it represents a tangible edge in execution quality and market efficiency.

In essence, both funds offer the same foundational exposure at the same cost. The decision hinges on the subtle but meaningful benefit of scale. For investors prioritizing the smoothest possible execution on large trades, VTI's superior liquidity provides a clear, practical advantage. For all other purposes, the two are interchangeable.

Historical Performance: A Test Through Market Cycles

For a value investor, the ultimate test of an investment vehicle is its performance across the full spectrum of market conditions. When comparing the two largest U.S. total market ETFs, Vanguard's VTI and iShares' ITOT, the evidence shows a story of near-identical risk and a very slight edge in return over the long haul. The practical impact of their underlying index differences is minimal for a buy-and-hold investor.

Over the full 22-year period from 2004 to 2026, VTI delivered a total return of 805.76%, slightly outperforming ITOT's 784.29%. This 21.47 percentage point difference translates to a marginally higher annualized return of 10.56% versus 10.44%. For a $10,000 investment, this gap grew to about $2,147 in additional wealth. While this is a tangible advantage, it is a very small one, representing a difference of just 12 basis points per year.

The real test, however, comes in periods of extreme stress. During the 2008 financial crisis, both funds faced severe drawdowns. VTI's worst loss was -55.45%, while ITOT's was -55.20%. The difference of just 25 basis points in peak-to-trough decline shows that, in a crisis, their risk profiles were functionally the same. This near-identical behavior underscores that both ETFs are capturing the same broad market exposure, with any divergence in performance being driven by subtle index construction nuances rather than fundamental strategy.

The pattern holds in more recent turbulence. In the 2020 pandemic crash, VTI's 1-year return was +21.08%, compared to ITOT's +20.71%. The difference here was a mere 37 basis points. This consistency across multiple market cycles-both the 2008 crash and the 2020 volatility-demonstrates that the underlying index differences have a negligible practical impact on total return for a long-term investor. The choice between them is a matter of fine detail, not a strategic decision.

Diversification and Exposure: The Breadth of the Market

For investors building a core equity portfolio, the choice between a total market ETF and a total market ETF often comes down to the fine print of diversification. While both the Vanguard Total Stock Market ETF (VTI) and the iShares Core S&P Total U.S. Stock Market ETF (ITOT) offer broad, low-cost exposure to the U.S. equity market, the practical implications of their differing holdings and methodologies are significant.

VTI holds approximately 3,527 stocks, providing a broader sweep across the entire market, including a larger representation of micro-caps. ITOT, by contrast, holds 2,498 stocks. This difference of over 1,000 holdings means VTI offers a marginally more granular diversification, spreading risk across a slightly wider slice of the market's total universe. For a value investor focused on minimizing idiosyncratic risk, this broader base is a tangible advantage.

Both funds, however, are heavily tilted toward the structural pillars of the modern market. Their sector allocations reveal a shared reality: technology and financial services dominate. VTI's largest sector is technology at 35%, followed by financial services at 13%. ITOT's profile is nearly identical, with technology at 34% and financial services at 13%. This concentration reflects the market's own structure, where a handful of mega-cap tech and financial firms drive a disproportionate share of overall returns and volatility.

The bottom line is that while the number of holdings sets a subtle but real difference in diversification depth, the sector tilt is a more powerful force shaping portfolio risk. Investors choosing between VTI and ITOT are not selecting between two different markets; they are choosing the same market with slightly different lenses. The broader diversification of VTI is a structural edge, but both funds deliver a portfolio that is, by design, heavily weighted toward the same two dominant sectors. This is the practical implication of index methodology: it doesn't just track the market, it defines the investor's exposure to its deepest structural currents.

Valuation and Intrinsic Value: The Price of the Holding

For investors seeking pure, low-cost exposure to the U.S. stock market, the choice between the iShares Core S&P Total US Stock Market ETF (ITOT) and the Vanguard Total Stock Market ETF (VTI) is a study in near-identicality. The minor performance differences between them do not translate into a meaningful valuation edge. Both funds are designed to be pure proxies for the market's intrinsic value, and their valuations are effectively identical.

The data shows a statistical dead heat. Over the past year, VTI has delivered a marginally higher total return of 14.76% compared to ITOT's 14.69%. VTI also offers a slightly higher dividend yield of 1.11% versus ITOT's 1.09%. Yet these differences are so small as to be noise for a long-term compounding strategy. They represent the inevitable micro-variance of two funds tracking the same broad market index, not a mispricing or a fundamental advantage for one over the other.

More importantly, the funds share the same foundational economics. Both carry an identical 0.03% annual expense ratio, ensuring that fees do not create a divergence in net returns. Their risk profiles are indistinguishable, with matching betas and nearly identical maximum drawdowns. The core of their holdings-the U.S. total market-is defined by the same index, meaning their sector allocations and exposure to individual companies are virtually the same. The primary distinction lies in scale: VTI is significantly larger, with $567 billion in assets compared to ITOT's $80 billion, and holds about 1,000 more stocks. For the average investor, this difference in diversification and liquidity is a practical consideration, not a valuation one.

The bottom line is that these ETFs are priced for the market, not for each other. Their valuations are identical because they are both pure, low-cost proxies for the market's intrinsic value. The tiny performance and yield differentials are the result of minor tracking errors and timing, not a structural undervaluation or overvaluation. For a disciplined investor, the choice comes down to personal preference on size and liquidity, not a search for a superior price.

Catalysts and Risks: What to Watch for the Long-Term Holder

For the long-term holder of a broad U.S. equity ETF like VTI, the primary risk is not the fund itself, but the market it tracks. Both VTI and its main competitor, ITOT, are designed to perfectly mirror the performance of the underlying U.S. stock market. Their expense ratios are identical at 0.03%, and their risk profiles are nearly indistinguishable, with max drawdowns of -25.35% and -25.36% over five years. The main risk, therefore, is market risk: a prolonged downturn in the broader economy or equity market will be reflected directly in the fund's value.

The primary catalyst for a meaningful shift in the thesis would be a significant change in the underlying indices or a major fee reduction by one provider. However, such a shift is unlikely. The indices they track-the CRSP US Total Market Index for VTI and the S&P Total Market Index for ITOT-are broad, well-established benchmarks. Any material change to either would signal a fundamental redefinition of the U.S. equity market, an event of systemic importance. Similarly, a fee reduction is improbable given the already ultra-low 0.03% expense ratio, which is a floor for this category of passive funds.

For the average investor, the key watchpoint is liquidity, and here VTI holds a decisive advantage. Its massive assets under management (AUM) of $567 billion dwarfs ITOT's $80 billion. This scale translates directly to seamless execution for any trade size. With a one-month average daily volume of $607 million, VTI is one of the most liquid ETFs globally. This ensures that investors can buy or sell large blocks of shares without significantly moving the price, a critical factor for portfolio rebalancing or tax-loss harvesting. In contrast, ITOT's daily volume is roughly one-sixth as large.

The bottom line is that for a buy-and-hold investor, the choice between VTI and ITOT is a choice between two nearly identical vehicles. The decision should be driven by liquidity preference and fund size, not by any anticipated change in the ETF's core function. The main risk remains the market, and the main catalyst for a change in the investment thesis would be a fundamental shift in the U.S. equity landscape itself.