ITOT vs VTI in 2016

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saxmaam
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ITOT vs VTI in 2016

Post by saxmaam »

There is a ITOT vs VTI thread already but it's a couple of years old. Please assume no trading fees for either fund.

ITOT - ISHARES CORE S&P TOTAL US STOCK MARKET
Tracks S&P Total Market Index
ER .03%
Turnover ratio 4%

VTI - VANGUARD TOTAL STOCK MARKET ETF
Tracks CRSP US Total Market Index
ER .05%
Turnover ratio 3%

Is it a wash? I understood that the CRSP indices lead to less turnover. Is the difference between 3% and 4% significant? Is it likely to stay a small difference?

Thank you for your input
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indexfundfan
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Re: ITOT vs VTI in 2016

Post by indexfundfan »

VTI And ITOT will likely perform the same for the years to come.

However, I would pick Vanguard's VTI for the reason that Vanguard is more committed to keep expenses low. Not so for ITOT from Blackrock.
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InvestorNewb
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Re: ITOT vs VTI in 2016

Post by InvestorNewb »

The difference of 0.02% is negligible unless you have millions of dollars invested. :happy
My Portfolio: VTI [US], VXUS [Int'l], VNQ [REIT], VCN [Canada] (largest to smallest)
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Re: ITOT vs VTI in 2016

Post by saltycaper »

The spread on ITOT tend to be larger than VTI, although sometimes it narrows to just a couple cents. I think either one is fine, but if you are transacting a large amount of money, watch the spreads.
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TheTimeLord
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Re: ITOT vs VTI in 2016

Post by TheTimeLord »

If you are with Fidelity ITOT is commission free, if you are with Vanguard VTI is commission free. Probably as good a way to decide as any.
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jhfenton
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Re: ITOT vs VTI in 2016

Post by jhfenton »

Another difference: Vanguard returns 100% of securities lending revenue to its funds. iShares returns 71.5% to 80% to its funds (based on one BlackRock white paper I found). Many other funds are even less "generous" with shareholders. I trust Vanguard to treat shareholders fairly in the long run.
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bertie wooster
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Re: ITOT vs VTI in 2016

Post by bertie wooster »

TheTimeLord wrote:If you are with Fidelity ITOT is commission free, if you are with Vanguard VTI is commission free. Probably as good a way to decide as any.
Agree - these funds are essentially identical, you'll be fine with either one.

They follow different indexes so you could use as tax loss harvesting partners (though this could be debatable as they are essentially identical...)
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saxmaam
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Re: ITOT vs VTI in 2016

Post by saxmaam »

saltycaper wrote:The spread on ITOT tend to be larger than VTI, although sometimes it narrows to just a couple cents. I think either one is fine, but if you are transacting a large amount of money, watch the spreads.
What does "watching the spreads" look like in practice?
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saltycaper
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Re: ITOT vs VTI in 2016

Post by saltycaper »

saxmaam wrote:
saltycaper wrote:The spread on ITOT tend to be larger than VTI, although sometimes it narrows to just a couple cents. I think either one is fine, but if you are transacting a large amount of money, watch the spreads.
What does "watching the spreads" look like in practice?
Just that if you see the bid and ask prices differ by 2 cents, that's probably more to your advantage than if they differ by 12 cents. I own some ITOT and have seen the difference vary widely throughout the day. For infrequent trading of small sums, it won't add up to much. For large sums, it might matter to you. It doesn't speak to overall changes in price, which obviously will matter even more, but you are probably giving up more to the market maker if the spread is wide than when it is narrow, and I'd prefer giving them less.
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Leif
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Re: ITOT vs VTI in 2016

Post by Leif »

Per Morningstar VTI has 27.97% potential cap gains exposure. ITOT has 7.08% exposure.
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saxmaam
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Re: ITOT vs VTI in 2016

Post by saxmaam »

Leif wrote:Per Morningstar VTI has 27.97% potential cap gains exposure. ITOT has 7.08% exposure.
Why would they be so different?

And am I correct that this would not matter in a tax advantaged account but would matter in regular taxable account?
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Re: ITOT vs VTI in 2016

Post by Leif »

^^
To your point, this is only a consideration in a taxable account.
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bertie wooster
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Re: ITOT vs VTI in 2016

Post by bertie wooster »

Leif wrote:Per Morningstar VTI has 27.97% potential cap gains exposure. ITOT has 7.08% exposure.
That's interesting. I would think through the creation of creation units VTI would be able to get rid of most of its cap gains, but I guess not. I'm guessing the reason is possibly because the funds were started at different times. Maybe ishares is better at getting rid of low basis shares? VTI has way bigger volume but maybe it's more buy/hold and ITOT is bought/sold more?
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saxmaam
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Re: ITOT vs VTI in 2016

Post by saxmaam »

bertie wooster wrote:
Leif wrote:Per Morningstar VTI has 27.97% potential cap gains exposure. ITOT has 7.08% exposure.
That's interesting. I would think through the creation of creation units VTI would be able to get rid of most of its cap gains, but I guess not. I'm guessing the reason is possibly because the funds were started at different times. Maybe ishares is better at getting rid of low basis shares? VTI has way bigger volume but maybe it's more buy/hold and ITOT is bought/sold more?
Is this a valid basis for choosing ITOT over VTI?
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bertie wooster
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Re: ITOT vs VTI in 2016

Post by bertie wooster »

I don't think so. Certainly not if you will hold the fund in a tax sheltered account. If you are in a taxable account it is something to consider - but then you'll be tax lost harvesting as well so you may end up holding both depending on what funds you choose as TLH partners.

VTI hasn't issued a cap gain since it's had an ETF share class, I don't expect it will anytime soon.
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Re: ITOT vs VTI in 2016

Post by Shazb0t »

I'd like to resurrect this thread as I'm contemplating between investing in ITOT at Fidelity versus opening an account with Vanguard and investing in VTI or VTSAX. This is in my taxable investment account. Looking at the these two funds, the obvious pro is ITOT has a lower ER. The con is the slightly larger bid/ask spread. Is there any reason not to go with ITOT? I'm new to this so bear with my if I've missed something obvious, thanks.
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Re: ITOT vs VTI in 2016

Post by stlutz »

If you already have an account at Fido and are happy there, definitely go with ITOT. Only suggestion would be to trade after the first hour or two of trading--when I've looked lately around mid-day spreads have been $.01 on ITOT (They tend to be wider at market open).

I plan to buy some ITOT myself in the near future in my IRA at Fido.

In any way that matters, ITOT and VTI are equivalent.
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Re: ITOT vs VTI in 2016

Post by grabiner »

saxmaam wrote:
bertie wooster wrote:
Leif wrote:Per Morningstar VTI has 27.97% potential cap gains exposure. ITOT has 7.08% exposure.
That's interesting. I would think through the creation of creation units VTI would be able to get rid of most of its cap gains, but I guess not. I'm guessing the reason is possibly because the funds were started at different times. Maybe ishares is better at getting rid of low basis shares? VTI has way bigger volume but maybe it's more buy/hold and ITOT is bought/sold more?
Is this a valid basis for choosing ITOT over VTI?
I don't think so. The creation-redemption process allows most ETFs to avoid realizing their capital gains, and should work well for both. In addition, total-market indexes rarely sell anything, so there aren't many capital gains to realize due to index turnover.

Before the development of ETFs, Vanguard Total Stock Market Index had very low capital gains, while Vanguard's small-cap indexes had much higher capital gains. Since the addition of ETFs, neither the large-cap nor the small-cap US indexes have distributed a capital gain, although the small-cap international VSS, which started near the 2009 market bottom, had small capital gains in its first two years.
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cookymonster
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Re: ITOT vs VTI in 2016

Post by cookymonster »

Someone check my calculations, but doesn't ITOT distribute almost twice as much in dividends compared to VTI?

Dividend distribution/share, last 12 months
VTI: 2.07
ITOT: 1.7

# shares/$10,000
VTI: 93.58
ITOT: 210.53

Total Distributions/$10,000
VTI: 193.71
ITOT: 357.89

If so, it seems that ITOT is the far less tax efficient option.

FWIW, if you do the same exercise with SCHB, it looks more tax efficient than either.
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cookymonster
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Re: ITOT vs VTI in 2016

Post by cookymonster »

Someone check my calculations, but doesn't ITOT distribute almost twice as much in dividends compared to VTI? (Why?)

Dividend distribution/share, last 12 months
VTI: 2.07
ITOT: 1.7

# shares/$10,000
VTI: 93.58
ITOT: 210.53

Total Distributions/$10,000
VTI: $193.71
ITOT: $357.89

If so, it seems that ITOT is the far less tax efficient option.

FWIW, if you do the same exercise with SCHB, it looks more tax efficient than either.
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Re: ITOT vs VTI in 2016

Post by saltycaper »

cookymonster wrote:
Someone check my calculations, but doesn't ITOT distribute almost twice as much in dividends compared to VTI? (Why?)
ITOT split in July 2016, so that might affect your # of shares/$10,000 calculation.
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cookymonster
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Re: ITOT vs VTI in 2016

Post by cookymonster »

saltycaper wrote:
cookymonster wrote:
Someone check my calculations, but doesn't ITOT distribute almost twice as much in dividends compared to VTI? (Why?)
ITOT split in July 2016, so that might affect your # of shares/$10,000 calculation.
Thanks, that makes perfect sense. If I divide the quarterly distributions in Dec 2015, March 2016, and June 2016 by two, they look pretty comparable:

Dividend distribution/share, last 12 months
VTI: 2.07
ITOT: 0.96

# shares/$10,000
VTI: 93.58
ITOT: 210.53

Total Distributions/$10,000
VTI: 193.71
ITOT: 202.10
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Re: ITOT vs VTI in 2016

Post by sabhen »

to broaden the discussion, any comments on SCHB as total stock market index compared with ITOT and VTI?
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Re: ITOT vs VTI in 2016

Post by radiowave »

Shazb0t wrote:I'd like to resurrect this thread as I'm contemplating between investing in ITOT at Fidelity versus opening an account with Vanguard and investing in VTI or VTSAX. This is in my taxable investment account. Looking at the these two funds, the obvious pro is ITOT has a lower ER. The con is the slightly larger bid/ask spread. Is there any reason not to go with ITOT? I'm new to this so bear with my if I've missed something obvious, thanks.
FYI, the VTSAX mutual fund equivalent at Fidelity is FSTVX (total stock) and is commission free. Premium class like Admiral class so minimum = $10K.
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Re: ITOT vs VTI in 2016

Post by saltycaper »

radiowave wrote:
FYI, the VTSAX mutual fund equivalent at Fidelity is FSTVX (total stock) and is commission free. Premium class like Admiral class so minimum = $10K.
I think Fidelity's Total Stock is okay if one prefers using mutual funds rather than ETFs, or if they prefer to invest using a Fidelity product rather than a BlackRock product, but in a taxable account, Fido's Total Stock mutual fund is expected to be less tax efficient than ITOT due to an ETF's ability to avoid or limit capital gains distributions.
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Re: ITOT vs VTI in 2016

Post by stlutz »

to broaden the discussion, any comments on SCHB as total stock market index compared with ITOT and VTI?
If you are at Schwab, use SCHB since it's commission free. In terms of trading liquidity it's not as good as VTI but better than ITOT. It has fewer microcap stocks than the other two, so it "only" covers 99% of the market cap that the other two do.

If using VTI is like getting a 98 on your math test, using SCHB is like getting a 97 on the same test.
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