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Are you planning to invest in index funds but are looking for the one that fits you best? Let’s get into two of the most popular index ETFs: SPY vs. VTI.
Investing in exchange-traded funds (ETFs) is a great way to diversify your portfolio. Index funds track specific market indices, such as the Center for Research in Security Prices (CRSP) US Total Market Index in the case of Vanguard Total Stock Market ETF (VTI) or the Standard & Poor 500 for SPDR S&P 500 Trust ETF (SPY).
As not all funds are created equal, we will look into the differences between SPY and VTI to help you decide which investment product is the best addition to your portfolio.
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Table of Contents show
SPY: SPDR S&P 500 ETF Trust
SPY, tracking the SPDR (Standard and Poor Depository Receipt) S&P 500 index, is an ETF. The main focus of SPY is to track the 500 large-cap stocks of the United States, known as the S&P 500 index. All 500 stocks are selected based on market size, industry, and liquidity.
SPY was one of the first ETFs listed on United States exchanges in 1993. At the time of its introduction into the market, SPY had $6.53 million in assets. It took the ETF only 3 years to increase its value to $1 billion in AUM (assets under management). Currently, SPY has $350 billion in assets.
Investors can exchange the ETF on multiple platforms. They can buy and sell securities, similar to other stocks, with the help of their broker. At present, the SPY expense ratio is accrued at 0.09%.
VTI: Vanguard Total Stock Market ETF
Vanguard Total Stock Market ETF (VTI) is another type of fund first listed on May 24, 2001. The Vanguard Equity Index group currently runs the fund. Like SPY, VTI has large-cap stocks, but it includes small and mid-cap companies, which makes the portfolio well-diversified.
VTI has a current 0.03% expense ratio, which has been consistently reduced from its 2017’s 0.05% expense ratio and has thus attracted many investors. It also has $256.07 billion in assets under management.
VTI has become quite popular among investors due to its low cost, the potential for tax efficiency, and broad diversification.
SPY vs. VTI: Key Differences
The first key difference between SPY and VTI is the firm that issues and manages the fund. VTI is a Vanguard Equity Index group fund, while SPY is a State Street Global Advisors Trust company fund.
The second and most important is the average daily trading volume (ADTV). This indicator, usually tracked for 20 or 30 days, shows the ETF’s demand and liquidity, with a lower ADTV pointing to the ETF’s lower sustainability. SPY beats VTI by a huge margin as its ADTV is $29.75 billion compared to VTI’s $841 million.
Next comes the underlying index. VTI tracks CRSP US Total Market Index, whereas SPY targets S&P 500. It makes the total number of holdings for VTI 4,003 compared to 501 holdings of SPY.
Remember that VTI has many more stock holdings than SPY, which will give you more exposure to the market. VTI has a more diversified portfolio, including mid and small-cap companies. Including small caps makes VTI potentially more volatile and, at the same time, could mean higher returns.
VTI and SPY pay quarterly dividends, and their dividend yields are similar. The dividend yield is the total amount the company pays yearly based on the share price. The dividend yield of VTI is 1.27%, whereas SPY has a slightly higher yield of 1.31%.
SPY vs. VTI: Composition Differences
SPY and VTI compositions are quite different. VTI comprises 87.1% large-cap stocks, 9.0%, and 2.4% small-cap stocks.
On the other hand, SPY has its major part covered with large caps. It comprises 97.5% large caps with only 1.0 mid-cap stocks. You will not find any small-cap stocks in it.
If we dig deep into the composition of the 2 ETFs, we will see that the top holdings for both are covered by major companies such as Apple, Microsoft, Amazon, and Tesla. However, the percentage covered by each company is quite different.
Here is the comparison between the percentages given to these major companies by SPY and VTI:
| Company Name | SPY ETF | VTI ETF |
| Apple | 6.99% | 6% |
| Microsoft | 5.95% | 5.10% |
| Amazon | 3.79% | 3.40% |
| Alphabet Inc | 2.20% | 2.80% |
| Tesla | 2.22% | 1.70% |
| Meta | 1.31% | 1.60% |
| Nvidia Corporation | 1.70% | 1.30% |
| Berkshire Hathaway | 1.69% | 1.20% |
| Johnson and Johnson | 2.04% | 1% |
| UnitedHealth Group | 1.26% | 1% |
The top 3 sectors for the VTI are technology, industrial, and consumer discretionary, with 28.40%, 13%, and 15.30% total share, respectively.
On the other hand, SPY’s top 3 sectors are technology, healthcare, and financials, with 25.60%, 13.40%, and 13.75% total share, respectively.
The 10 largest holdings of both ETFs cover around 25% of net assets.
SPY vs. VTI: Performance Differences
Before getting into the performance analysis, you must know that SPY has 84% of the VTI securities. So, if you buy SPY, you will get most of VTI automatically.
SPY and VTI are both performing quite well in the market. However, small caps have come out to be more profitable than large caps in the past couple of decades. Starting from 2001, when VTI was first launched, it outperformed SPY, which holds no small-cap stocks.
For almost 13 years, VTI has led the market in terms of overall performance. However, from 2015 onwards, SPY’s large caps have been leading the market.
| SPY Performance & Returns: | VTI Performance & Returns: | ||
| Returns | Percentage | Returns | Percentage |
| YTD Returns | -17.76% | YTD Returns | -18.74% |
| 1-Month Return | 8.08% | 1-Month Return | 8.17% |
| 3-Months Return | 8.08% | 3-Months Return | -5.52% |
| 1-Year Return | -14.67% | 1-Year Return | -16.89% |
| 3-Year Return | 10.08% | 3-Year Return | 9.67% |
| 5-Year Return | 10.29% | 5-Year Return | 9.80% |
| 10-Year Return | 12.64% | 10-Year Return | 12.41% |
If we look into the volatility of the 2 ETFs’, VTI has proved to be a bit more volatile than SPY. Considering the performance of the past 2 decades, VTI has shown 5% more volatility.
The difference between the two is almost negligible, but considering how well VTI recovered from the financial crisis a decade ago compared to SPY proves it to be a resistor of economic variations.
SPY vs. VTI: Fees
VTI rates are quite low compared to SPY. According to Forbes, the difference in rates is now pulling investors from SPY, forcing them to shift to VTI.
SPY is currently charging almost double VTI. VTI charges 0.03 percent of your total investment, whereas SPY charges 0.0945 percent.
The price can be estimated considering a $10,000 investment. On SPY, you will have to pay $9.45 every year. On the other hand, VTI will only ask for $3 a year. While this difference seems minimal, you will notice a difference in your returns over time.
SPY vs. VTI: Which Is Better?
The bottom line is that the best fund for you will depend on your investment style and financial goals.
Their dividend yield percentages are roughly the same (VTI at 1.47% and SPY at 1.46%), but this percentage is subject to market volatility, and each fund can alternately top this indicator.
VTI is the better option if you are a daily trader who likes to keep things moving and is not averse to taking bigger risks. With VTI’s greater number of stocks, including small-cap ones, you will gain broader market exposure and its consequent risk but possibly higher gains. VTI’s lower expense ratio, which has been gradually decreasing since 2017, has been gaining favor among money-wise investors.
On the other hand, SPY is the way to go if you are a conservative investor who doesn’t like to take too many risks. If we look into the recent statistics, SPY is preferred by most investors because of its reliability. However, many analysts suggest that its high expense ratio isn’t worth the risk, and it’s better to invest in VTI to get higher returns at the cost of increased risk.
So, before you decide, carefully weigh your preferences and objectives and do your due diligence. It’s all in your hands.
Frequently Asked Questions (FAQs) – SPY vs. VTI
Is SPY the Same as VTI?
No, SPY and VTI have some major differences between them. SPY tracks the S&P 500 index, whereas VTI works on the CRSP US Total Market Index.
SPY has around 501 holdings in its portfolio, mainly focusing on large-caps. On the other hand, VTI has more than 4,000 holdings, making its portfolio much broader and diverse, focusing on large-, mid-, and small-caps.
Why Is VTI the Best?
Many analysts consider VTI the best because of its low expense ratio compared to other ETFs.
Recently, VTI further reduced its expense ratio from 0.04% to 0.03%, which has attracted many investors. The high probability of returns is another major plus for this Vanguard ETF. The risk of loss will be higher with VTI, but its possible returns make the investment worthwhile.
Should I Just Buy SPY?
SPY is the most suitable option if you follow a long-term investing strategy.
Even if you decide to keep a hold of your stocks, SPY will pay you 4 times yearly in the form of a dividend.
Should I Own Both VTI and SPY?
SPY covers 84% of VTI holdings, so if you already own SPY, you already have 84% of VTI securities.
For diversification purposes, consider pairing VTI with an international fund, such as VEU or VXUS.
Is VTI Similar to S&P 500?
VTI is 84% similar to S&P 500, but the 12% of mid-and small-cap stocks is what makes the difference. They increase volatility, which can give higher risk and, in turn, could give higher returns.
VTI has been performing quite similarly to S&P 500, but most analysts, such as The Motley Fool, predict VTI to beat it in the long term.
Conclusion – SPY vs. VTI
Depending on your financial goals and personal preferences as an investor, investing in either SPY or VTI can be a good choice. Before investing, it’s important to do your due diligence and research both options to understand their investment strategy and past performance.
Consider the emerging markets, minimum investment required, and whether the fund is hedged. With careful consideration, you can make an informed decision and potentially achieve your financial goals in your investment journey.
Related reads:
- VXX Vs. VIXY Comparison – Which Volatility ETF Is Best For You?
- SPYD Vs. SPYG – Which ETF Is Better For You?
Marjolein Dilven
Founder of Spark Nomad, Radical FIRE, Journalist
Expertise: Personal finance and travel content
Education: Bachelor of Economics at Radboud University, Master in Finance at Radboud University, Minor in Economics at Chapman University.
Over 200 articles, essays, and short stories published across the web.
Experience: Marjolein Dilven is a journalist and founder of Radical FIRE, a personal finance platform, and Spark Nomad, a travel platform. Marjolein has a finance and economics background with a master’s in Finance. She has quit her job to travel the world, documenting her travels on Spark Nomad to help people plan their travels. Marjolein Dilven has written for publications like MSN, Associated Press, CNBC, Town News syndicate, and more.
