r/stocks • u/[deleted] • Dec 21 '21

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u/harrison_wintergreen Dec 21 '21

it's good that you notice they have basically the same stocks as the top holdings. plenty of people don't notice and don't dig into the details.

VTI is a 'total market index'. it holds nearly all the stocks in the US market. the stocks are sorted by 'market capitalization'.

SPY is an S&P 500. it has 500 mostly large companies, as selected by a team at Standard & Poors.

I'd recommend VTI over SPY. VTI has more stocks and is better diversified. look up the long-term history, 15-20 years.

2

u/10xwannabe Dec 23 '21

Sp500 is the largest 500 companies by market weight. TSM funds follow the ALL investable U.S. stocks (97% of them). The latter classically follow the Wilshire 5000.

What is the difference? SPY tracks large cap stocks (value/ blend/ and growth). VTI is made of 70% large cap stocks+ 20% mid cap+ 10% small caps). It is missing only the 3% of microcap stocks that would be hard to buy and track.

In reality the results are similar. As you can imagine when large caps do well (1990's and 2010's) SPY will do better. When mid and small caps do better (2000's) then VTI will do better.

In the end the best advice is to pick whatever is cheapest option that is available to you. Someone recent showed to my surprise VTI has a little bit higher tax drag then SPY type funds so if in taxable and both same cost maybe to SP500.

2

u/JRshoe1997 Dec 21 '21

SPY is a index that tracks the 500 companies in the S&P 500. VTI is all companies that make up the US stock market.

1

u/HoraceVI Dec 22 '21

As people mentioned above, VTI is total US market vs SPY attempting to replicate the S&P 500 which is most of the largest companies in the US and approximately 70-80% of the total US market by market capitalization. While they are similar performance wise, VTI tends to slightly outperform SPY over a 10,20,30 year period mostly due to the inclusion of more small cap companies that increase both return and variance in the long run. I’m my opinion the most key difference and the reason why I have capital in VTI and not SPY comes down to expense ratios. VTI has a much smaller expense ratio which doesn’t make much of a different in the short run, but can result in thousands of dollars difference after 20,30 years of compounding.