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:
SPY vs VTI
| SPY | VTI | |
|---|---|---|
| Name | SPDR S&P 500 Trust ETF | Vanguard Total World Stock Index Fund ETF |
| Underlying Index | S&P 500 Index | CRSP US Total Market Index |
| Investment Objective | 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:
| SPY | VTI | |
|---|---|---|
| Number of Stocks | 503 | 3731 |
| Sector breakdown | Information Technology: 29.6% Financials: 13.2% Health Care: 12.4% Consumer Discretionary: 10.4% Communication Services: 8.95% Industrials: 8.8% Consumer Staples: 5.6% Energy: 3.95% Materials: 2.4% Real Estate: 2.3% Utilities: 2.2% | Technology: 32.3% Consumer Discretionary: 14.5% Industrials: 13% Health Care: 12% Financials: 10.7% Consumer Staples: 4.5% Energy: 3.9% Real Estate: 2.8% Utilities: 2.5% Telecommunications: 1.9% Basic Materials: 1.9% |
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.
