ITOT vs IVV: Which ETF Is Best?

Putting your hard-won cash into a diversified ETF is like scoring the ultimate investment touchdown. You get to dabble in different sectors, but you’re spared the relentless chore of hovering over your portfolio.

Among the smorgasbord of options flooding the market, a duo has managed to rise to prominence: BlackRock’s iShares Core S&P 500 ETF and its counterpart, the iShares Core S&P Total US Stock Market ETF.

Wondering what all the buzz is about these two ETFs? Let’s dive deep to suss out their distinctive strengths, key bells and whistles, and naturally, the risks that shouldn’t be overlooked.

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The IVV and ITOT: What Do They Do?

Founded in May 2000, the iShares Core S&P 500 ETF (IVV) presents investors with a distinct chance to tap into the US market by concentrating on major, well-established firms. 

Indeed, the IVV aims to mirror the S&P 500 Index, and as of September 01, 2023, its net assets are worth a staggering $353 billion. Its number of holdings currently stands at 503, and the yield its quarterly dividend produces comes in at 1.44% over the prevailing twelve-month period.

Moreover, with 780 million shares outstanding and a daily trading volume of 2.85 million, the fund is also highly liquid, meaning that it can be easily bought and sold, giving stakeholders the flexibility to initiate quick investment decisions.

Conversely, the iShares Core S&P Total US Stock Market ETF (ITOT) aims to mirror the S&P Total Market Index, evident in its extensive collection of 3,256 holdings.

Yet, with 459 million shares in circulation and a net worth of $45.8 billion, this fund is more modest in size compared to its S&P 500 equivalent. That said, the ITOT is still relatively liquid for its size, boasting a daily trading volume of 761 thousand shares across all US exchanges.

Interestingly, over the last half-decade, iShares Core US Equity Market ETFs have beaten the performance of their peers by an average of 60% while also not paying out any capital gains distributions during that time.

Assets Under Management

Although there’s definitely some overlap between the makeup of the two investment vehicles, there are likewise many other distinctive features in their composition, too.

Hence, not only are the top ten holdings in the ITOT and IVV funds precisely the same, but they occur in the same order of rank as well. 

In fact, it’s no surprise to find a business as august as Apple (AAPL) accounting for the largest position in the S&P 500 and the Total U.S. Stock Market ETFs, with Microsoft (MSFT) and Amazon (AMZN) coming in second and third respectively.

However, there is a notable difference when looking at the weighting of each company in that list. 

For instance, AAPL, MSFT, and AMZN comprise 17.6% of the total value of the IVV, while the same firms only comprise 15.1% of the iShares Core S&P Total U.S. Stock Market ETF. This naturally implies that the success or otherwise of the iShares Core S&P 500 ETF is far more dependent on those tech giants’ fortunes than it would be with the ITOT.  

IVV vs ITOT: Track Record and Expense Ratio

A big selling point for the iShares Core US Equity ETFs is their wallet-friendly fee setup, aimed to let investors pocket more of their long-term gains.

BlackRock keeps it straightforward by charging a flat 0.03% management fee for both the IVV and ITOT ETFs. And get this, they’ve nixed any extra Acquired Fund Fees and Expenses. The end result? A razor-thin expense ratio of just 0.03%.

Furthermore, the 30-day median bid/ask spread of 0.01% for each fund is another plus point since this translates to a reduced cost for entering and exiting positions – a factor that can lead to significant savings for frequent traders.

Given that ITOT and IVV invest in similar companies, it stands to reason that their performance would likely match one another. 

Hence, the S&P Total U.S. Stock Market ETF cumulative return of 18.90% for the last year is close to the S&P 500 ETF’s 19.57%. However, the ITOT has done better since its inception, returning 454.94% compared to the IVV’s 370.40%.

Which Is Best: iShares Core S&P Total US Stock Market ETF or iShares Core S&P 500 ETF?

At first look, the distinction between the two funds might appear minimal, but delving into key metrics could reveal another narrative.

To begin with, the S&P Total U.S. Stock Market ETF’s price-to-earnings ratio stands at 21.05, which seems more affordable than the S&P 500 ETF’s more expensive 22.44. On top of that, ITOT’s price-to-book multiple of 3.76 is also discounted when viewed against IVV’s less attractive 4.17.

However, as Albert Einstein once noted, not everything that counts can be counted – and in an age where the environmental, social, and governance (ESG) qualities of an ETF are as important as the profits it generates, investors cannot afford to ignore them.

As such, the critical determinant between the IVV and the ITOT may very well be its MSCI ESG Quality Score. 

Hence, the S&P 500 ETF’s peer percentile of 43.23% – which easily trumps the Core S&P Total U.S. Stock Market’s 22.22% – suggests that, if the ESG agenda becomes even more important to investors in the future, the less sustainable fund may, ultimately, become sidelined, allowing the premium priced IVV to dominate despite its hefty price tag.

Conclusion: ITOT vs IVV

At first look, you might think these two funds are practically twins, but dig a little deeper and you’ll find they’re tailored for investors with distinct preferences.

Consider IVV—it’s like the magnifying glass that zooms in on the S&P 500’s elite, giving you a front-row seat to America’s top-performing companies. Now, switch your gaze to ITOT—it’s more like a wide-angle lens capturing the whole panorama, from the heavyweights of Wall Street to the scrappy startups that round out the U.S. economic landscape.

While it’s true both ETFs are standout performers in areas like cost, performance, and how easily you can buy or sell them, the devil’s in the details. Even slight differences in how their portfolios are built, the sectors they lean into, and their particular areas of focus could tip the scales over time.

And don’t overlook the growing importance of ESG, or environmental, social, and governance factors. IVV is already ahead of the curve, boasting a strong MSCI ESG Quality Score. As the investment world continues to evolve, this could become a pivotal factor in choosing where to park your money.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.