Both SPY and VTI are popular exchange traded funds (ETFs) that allows you to own a well diversified basket of stocks with a single trade. The key difference here is that SPY gives you exposure to the S&P 500 while VTI lets you own the entire market by tracking the Vanguard Total Stock Market Index.
If you’re looking for an ETF that gives you exposure to the US market, you may be weighing the difference between SPY vs VTI.
Here’s what you need to know before you pick the most suitable ETF for your portfolio:
Gives you exposure to 500 of the largest stocks listed in the US markets.
Gives you exposure to large, mid, small, and micro-cap stocks in the US markets.
Expense Ratio
0.0945%
0.03%
AUM (USD)
$536.15B
$1.5T
No. of Holdings
503
3731
Inception Date
22 Jan 1993
24 May 2001
Fund Manager
State Street Global Advisors
Vanguard
SPY vs VTI: Strategy
Before you invest in any ETFs, you should first understand what you’re investing in. Here’s what you’ll be investing in with the SPY and VTI ETFs respectively:
SPY is an S&P 500 index ETF, it gives you exposure 500 of the largest companies (by market cap) that are listed on stock exchanges in the United States.
VTI on the other hand, tracks the CRSP US Total Market Index which gives you exposure to all investable stocks listed in the U.S. markets.
Key differences that result from their respective strategies:
While their returns appear similar, they are not the same under the hood. Speaking of returns, let’s take a look at their historical performance:
SPY vs VTI: Performance
Both SPY and VTI offer very similar returns, with the SPY providing slightly better returns at 12.7% CAGR vs VTI’s 12.13% CAGR over the past 10 years.
For the detailed oriented investors, here’s a comparison of SPY vs VTI’s performance across various time periods:
1-yr
3-yr
5-yr
SPY
30.25%
11.76%
14.60%
VTI
29.37%
9.62%
14.25%
And, here’s a comparison of SPY (blue) vs VTI (red) returns on an annual basis:
Disclaimer: you should take this with a pinch of salt. After all, past performance is not a guarantee of future performance.
Now that we know what we’re investing in with SPY and VTI, and what their historical performance are, let’s take a look at how much these ETFs will cost us.
SPY vs VTI: Cost
SPY’s expense ratio is 0.0945% while VTI’s expense ratio is 0.03%.
(p.s. you can also consider cheaper S&P 500 index ETFs like VOO and IVV)
SPY vs VTI: Volatility
You may also be wondering about the volatility of these ETFs. Would SPY or VTI be less volatile (and provide less anxiety when the markets are haywire)?
To understand this, we compare their standard deviation and maximum drawdown over the past 10 years. At the point of writing, they are:
SPY
VTI
Standard Deviation
15.04%
15.48%
Maximum Drawdown
-23.93%
-24.81%
Although the difference are not very significant, the SPY offered less volatility over the past 10 years.
Conclusion: What is better VTI or SPY?
Although their returns are pretty similar, SPY and VTI gives you exposure to different portfolios. SPY gives you exposure to the S&P 500 index while VTI allows you to own a portion of all the investable stocks listed in the US markets.
If you prefer a more diversified portfolio, VTI is a better option.
If you’re looking for a lower cost ETF, VTI is also better than SPY. That said, you could also opt for the lower cost S&P 500 ETFs like VOO and IVV with expense ratios of 0.03% as well.
If you’re looking for dividends, then you might want to consider the SCHD ETF instead.
If you prefer a more diversified portfolio, VTI is a better option. If you're looking for a lower cost ETF, VTI is also better than SPY. That said, you could also opt for the lower cost S&P 500 ETFs like VOO and IVV with expense ratios of 0.03% as well.
You can't go wrong with either the Vanguard Total Stock Market ETF or the Vanguard S&P 500 ETF. Both offer very low expense ratios and turnover rates, and the difference in their tracking errors is negligible. The overlap in their holdings ensures that you'll get very similar returns going forward.
Both VOO and SPY are index funds based on the S&P 500. Stock holdings and sector allocations are nearly identical. Performance is also nearly identical, but the VOO has slightly outperformed the SPY over the long term. Both funds are easily available at popular investment brokers and through robo-advisors.
The only difference is that VTI's expense ratio is slightly lower at 0.03% compared with 0.04% for VTSAX. This is in alignment with other Vanguard comparisons, such as VOO versus VFIAX. The lower expense ratio gives VTI a slight edge in performance, especially for periods of less than 10 years.
The ETF's top sector is technology, with a 27.7% weighting, while Microsoft, Apple, and Alphabet are its top three holdings, making up 13.2% of the ETF. It has a low expense ratio (0.03%) and tracks the broader stock market very closely (beta of 1), making it a low-cost way to get exposure to the U.S. equity market.
Smaller company stocks can be considered riskier than large company stocks and may or may not perform better. You can see this in the difference between year-to-date returns of the funds. VTI is underperforming VOO & SPY by about 0.5% this year. In other years, VTI will outperform.
Vanguard Total Fund VTI stock price stood at $261.75
According to the latest long-term forecast, Vanguard Total Fund VTI price will hit $300 by the middle of 2025 and then $350 by the middle of 2027. Vanguard Total Fund VTI will rise to $450 within the year of 2028, $500 in 2030 and $600 in 2034.
Almahasneh says the reason is fees. VOO charges 0.03%, while SPY charges 0.09%. With all else equal, the fund with the lower fee is more aligned with investors' best interests. The author or authors do not own shares in any securities mentioned in this article.
SPY is traded on the New York Stock Exchange (NYSE Arca) and is highly liquid, making it a popular choice for investors looking to gain broad exposure to the US stock market.
VTI - Volatility Comparison. Invesco NASDAQ 100 ETF (QQQM) has a higher volatility of 4.01% compared to Vanguard Total Stock Market ETF (VTI) at 3.22%. This indicates that QQQM's price experiences larger fluctuations and is considered to be riskier than VTI based on this measure.
Average Return. In the past year, QQQ returned a total of 39.07%, which is significantly higher than SPY's 30.74% return. Over the past 10 years, QQQ has had annualized average returns of 18.80% , compared to 12.91% for SPY. These numbers are adjusted for stock splits and include dividends.
The Vanguard High-Yield Corporate Fund is the company's top performing bond fund over the past decade. It features a high-yield, intermediate-term fixed income portfolio.
VTI is a total U.S. market fund and holds more than 3,500 stocks. VTI is better diversified and benefits from small and mid-cap stocks that grow into large caps. VOO is less diversified, tracking the performance of the S&P 500 Index. VOO excludes small and mid-cap stocks.
Bottom line. The SPY ETF is a cost-effective investment option for investors looking to gain exposure to about 500 large US companies. However, it is also subject to the same risks as any other investment in the stock market, including market volatility, and economic and geopolitical risks.
Introduction: My name is Kimberely Baumbach CPA, I am a gorgeous, bright, charming, encouraging, zealous, lively, good person who loves writing and wants to share my knowledge and understanding with you.
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