The Vanguard Total Stock Market ETF (symbol: VTI) and Vanguard Total World Stock ETF (symbol: VT) are two of the most popular ETFs in the market. As their names imply, VT holds stocks from the entire world, while VTI only holds American stocks. Given the funds’ popularity, many people compare VT vs VTI or ask which fund is a better investment. However, the two funds are completely different and not comparable.
The Short Answer
VT and VTI are very different and not comparable. The primary consideration when evaluating VT vs VTI is whether the investor wants the simplest portfolio or plans to manage the geographic weights more granularly. This assuming that the investor wants to use ETFs rather than direct indexing, mutual funds, etc.
My goal here at ThoughtfulFinance.com is to educate investors and that sometimes includes not answering the exact question that was asked, reframing questions, or providing a different type of answer. As always though, a quick reminder that this site does NOT provide investment recommendations. Fund comparisons (such as this one) are not conducted to identify the “best” fund (since that will vary from investor to investor based on investor-specific factors).
Note: Investors in High Tax Brackets
Investors who are in the highest tax brackets and are investing at least a few hundred thousand dollars should generally look beyond VT, VTI, other ETFs (or mutual funds) and consider direct indexing for taxable assets. That is beyond the scope of this post, but a third-party generally handles everything and the tax benefits may be substantial.
VTI vs VT: Performance & Expenses
I could compare VTI and VT’s historical performance, expense ratios, tax-efficiency, and so on as many sites do. However, these details are only important points of comparison if the funds are comparable, so this post doesn’t include a bunch of meaningless data. Those who are still interested can check out ETF.com’s comparison tool.
Historical Performance
VTI was launched in mid-2001, while VTI was launched in mid-2008. Since then, VTI has returned 10.82% versus VT’s 7.06%. Thus VTI has outperformed by a wide margin (of over 3.75% annualized). This annualized difference has compounded over time to over 190%. This has largely been driven by the US’s outperformance relative to the rest of the world over the past 15 years. This outperformance may or may not continue in the future.
That being said, comparing historical performance of VT vs VTI is meaningless as they have objectives, holdings, exposures, and so on. One fund will outperform over certain time periods and the other will outperform over other time periods.
Expenses
VTI’s expense ratio is .03%, while VT is at .07%. Again, any performance difference caused by the expense ratios of VTI and VT will be dwarfed by larger differences like holdings, exposures, risk factors, etc. Expenses are very important when all else is equal, but VTI and VT are not equal at all!
VTI vs VT: Holdings & Exposures
VTI and VT are not comparable because their underlying holdings are so different. An investor’s preference for VTI or VT will depend on its role in the portfolio. That being said, the two funds are relatively similar.
VT tracks the FTSE Global All Cap Index, while VTI tracks the CRSP US Total Market Index.
Holdings
The holdings of VT and VTI are quite different (VT essentially owns everything that VTI does plus more).
| VT | VTI | |
| Number of Stocks | 9,570 | 3,861 |
| Median Market Cap | $71.6 billion | $138.7 billion |
| Fund Assets (including all share classes) | $39.9 billion | $1.4 trillion |
Market Cap
Both VT and VTI are total market funds that include all market caps and are cap-weighted towards large caps. The market cap exposures of the two funds are nearly identical.
| VT | VTI | |
| Large Cap | 75% | 72% |
| Mid Cap | 19% | 20% |
| Small Cap | 6% | 9% |
Sector Exposure
Both funds are well-diversified across sectors and their sector weights do not materially differ.
| VT | VTI | |
| Basic Materials | 4.74% | 2.48% |
| Consumer Cyclical | 11.40% | 10.86% |
| Financial Services | 15.10% | 12.44% |
| Real Estate | 3.09% | 3.08% |
| Communication Services | 7.04% | 7.95% |
| Energy | 4.70% | 4.31% |
| Industrials | 11.24% | 9.47% |
| Technology | 21.84% | 27.71% |
| Consumer Defensive | 6.71% | 6.09% |
| Healthcare | 11.45% | 13.14% |
| Utilities | 2.69% | 2.48% |
Geographic Exposure
VTI holds essentially 100% US stocks, while VT owns stocks from the US, developing markets, and emerging markets.
| VT | VTI | |
| Developing Markets | 90% | 100% |
| Emerging Markets | 10% | 0% |
Below are the top country exposures of each fund.
| VT | VTI | |
| US | 60.5% | 100% |
| Japan | 6.2% | 0% |
| UK | 3.8% | 0% |
| China | 3.3% | 0% |
| Canada | 2.8% | 0% |
ETF Benefits
Both VTI and VT are exchange-traded funds (ETFs), which do have some advantages for investors.
Tax Efficiency
ETFs are typically more tax-efficient than mutual funds, due to their ability to avoid realizing capital gains through like-kind redemptions (a process that is beyond the scope of this post). Neither fund has ever made a capital gains distribution, nor do I expect either to. Thus, these funds are about as tax-efficient as any fund can be and either fund is appropriate in taxable accounts.
Tradability
ETFs are free to trade on many platforms the bid-ask spread is extremely low for both VT and VTI. Individuals investors should have no problem trading VTI or VT, which are both large and liquid.
Alternative Vehicles
Investors limited to mutual funds should have no problem finding a mutual fund version of VTI (such as VTSAX) or a mutual fund version of VT (such as VTWAX).
Investors planning to allocate more than $250,000 may consider direct indexing rather than an ETF or mutual fund, especially if they are in a high tax bracket. Any institutional direct indexer should be able to replicate VTI or VT easily.
Types of Investors
There are a few reasons that someone might want to know whether VTI or VT is a better investment and I think it has a lot to do with who they are. Different types of investors have varying levels of knowledge, differing goals, and so on.
New Investors
For new investors without much investing experience, I generally recommend just buying a global fund (such as VT) for equity exposure. A single fund provides all of the asset allocation and diversification one needs without worrying about geographic tilts, rebalancing, and so on. Using a single fund could even be a great choice for experienced investors who crave simplicity.
Most Investors
While VT is a great option, separating equity exposure into two (or more) funds allows for more personalized allocations and tax-efficiency.
By using VTI for US exposure and an international fund for non-US exposure, investors can fine-tune a portfolio’s geographic weights. VT owns approximately 60% US stocks (as of 6/30/2023) and 40% non-US stocks. However, an investor may want 70% US stocks and could invest 70% of their assets in VTI and 30% in an international fund. Many investors (including myself) may fine-tune further split the international exposure into a developed markets fund and an emerging markets fund. Of course, an investor could just buy VT as a core position and then buy VTI, an international fund, or whatever as a satellite position to tilt their portfolio towards US, non-US, etc. Admittedly, I have not seen this often and probably would not advise it, but theoretically investors do not have choose VT or VTI as both can be used in a portfolio IF its thoughtfully constructed.
One benefit of using multiple funds is that there will be more opportunities for tax-loss harvesting. Imagine a situation where US stocks go up 5% and non-US stocks decline by 5%. In this case, VT would be up by 1% (calculated as 60% US stocks x 5% + 40% non-US stocks x -5%). However, if an investor held VTI and a non-US fund, they could hold VTI while selling the non-US fund (and rotating into another non-US fund) to realize a tax loss. In this case, the investor would have better after-tax returns by using two funds. Of course, the more assets and the higher dispersion between the assets’ returns (known as cross sectional volatility), the better the after-tax returns could be.
Using two funds rather than one fund only makes sense if an investor has a view on US vs non-US weights OR has the capacity and discipline to monitor and take advantage of tax-loss harvesting opportunities. If neither of these is the case, it may be better to just go with the simple one fund portfolio of VT.
What Would I Do: VTI or VT?
In my opinion, both VT and VTI are well-constructed funds that do what they are designed to do. Using one versus another is not about selecting the “better” fund, but about how they are used in a portfolio. As noted above, I would use VT if I wanted a simple, low-maintenance, one-fund portfolio. For those who want to customize their portfolio a bit more, using region-specific funds such as VTI might be the way to go.
