VT vs VTI: A Practical Analysis

VT vs VTI: A Practical Analysis

By: Corey Philip
Updated: February 3, 2022

VT and VTI are two low cost index funds from Vanguard.  Here I take a look at their differences, historical performance and use scenarios.  

I believe I cover more details in the video.

TLDR;

  • VT holds the global market (US and international Stocks)
  • VTI holds only US Equities
  • VT is more diversified Than VTI
  • VTI has outperformed VT over the past 30 Years
  • VT has an expense ratio of 0.08%, while VTI is 0.03%.
  • A combination of VTI and VXUS would allow you to control your allocation to International/US (as opposed to all in VT)

Basics 

The ticker symbols can be confusing!

VT is Vanguard’s total world stock ETF, while VTI is Vanguard’s Total US Stock Market ETF. 

VT gets exposure to stock across the entire globe.  

VTI is a US only ETF.  

AUM & Fee’s

Both of these funds are low fee as you would expect by vanguard.  VT has an expense ratio of .08% while VTI has an expense ratio of .03%.

Because with VT, the .08% is allocated to also the US holdings it is technically cheaper to hold US equities through the VTI ETF  and international equities in separate ETF… but really at the most you would save is .05% so I wouldn’t make this move just to save $$$.

Portfolio composition

VT holds 9,304 stocks from around the globe tracking the FTSE Global All Cap Index.  This is a market cap weighted index that is sector, and regional agnostic.  As a global fund it does have exposure to emerging markets (however not frontier markets).  As an asset class split it is currently holding 58.96% in US Equity and 40.20% in International equity (the difference of 100% is in cash).  This allocation WILL change over time depending on market capitalization.

On a ‘stock style’ basis the portfolio is titled more towards value then VTI as international equities are at far lower valuations than US equities by basically any metric (I like the CAPE Ratio)

VTI holds 4,132 stock in only the US tracking the CRSP US Total Market Index.  It’s also agnostic in style in sector, but is limited to the US.

The Morningstar stock style shows more exposure to mid-small cap stocks.  THis is likely because the US market has relatively more capitalization to small cap stocks.

Sector Exposure

Source: Morningstar

This is where things get interesting, VTI currently has really high exposure to the tech sector (26.26%) and second highest exposure to healthcare at 13.40%.  In the US there is very high concentration, and maybe a bubble in tech.  

Globally speaking, with VT, there is only 21.45% exposure to the tech sector and the second highest is financial services at 14.99%.

Global Allocation of VT

Recall earlier I mentioned the asset allocation of VT (currently) holding 58.96% in US Equity and 40.20% in International equity.  I personally find this interesting because that is pretty close to a true market cap weighting split between global and international equities.  Most asset allocations in are currently tilting towards US equities... this is largely due to their substantial outperformance over the last 10 years and efficient frontier modeling. 

VT vs VTI - Historical Performance

Naturally many new investors want to know which one of these ETFs have done better?

While its is cool to look at historical performance, it is quite frankly irrelevant and a major mistake many investors make.  

Because both VT and VTI are relatively young ETF's I decided to look at their performance using their underlying markets, that would allow us to see historical performance to 1986.  

In this graph we can see the cumulative total return of a $10,000 investment into each one of these funds, since Jan 1986, using the underlying market as a proxy.  I also put 100% international equities on there just for illustrative purposes.

The investment in VTI would've grown at a compound annual growth rate (CAGR) of 10.92% to $420,532.  Comparatively the investment in VT wouldn't have done so hot only growing at 9.27% annually to $245,261.  

There's a few things to point out...

...in the late 80s, VT would've bubbled up before going on to underperform VTI and it's 100% US Equity exposure.

... VTI only outperformed VT by 1.65% but this compounded over 20+ years resulted in a total difference of over $175,000.

...Clearly over this time period US Equities kicked ass, and that might have you wondering, why even bother with international equities.... 

The Case For Maintaining Exposure To Global Equities

Historical performance is not indicative of future results.  That little disclosure.  

It applies here.  Who's to say that for the next 35 years, international equities won't out perform US Equities?

At different periods in time, international equities have outperformed US Equities.  

In the video I did on this topic of VTI vs VT above I look deeper into this and show some charts and data.

Which One Is Right For Your Portfolio? 

Both are great funds for their respective objective.  

If you really want simplicity, you could use VT combined with a bond fund to basically achieve a 2 fund portfolio (related: video on What If You Invested $1,000 Per Month in The 3 Fund Portfolio).  

However using a combination of VTI and VXUS you can get a slightly lower fee and control your allocation of US to Global equities.  

Alternatively if you feel that the equity markets are correlated enough you could make the case that exposure to international stocks brings more risk than reward and go 100% VTI.  

Corey Philip

Founder of a home service / specialty trade contracting company (think patio's and deck) with a focus on customer experience. Quantitative investor. Data driven marketer. Runner.

Let's Discuss!  Drop A Comment Below.


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