On Monday morning, the Vanguard Total Stock Market ETF (VTI) edged up 0.2% to $363.60, while BlackRock's iShares Core S&P Total U.S. Stock Market ETF (ITOT) also rose 0.2% to $161.51. These two funds, both charging a razor-thin 0.03% expense ratio, offer investors nearly identical low-cost access to the entire U.S. equity market.
The timing of this uptick coincides with a broader wave of money flowing into U.S. equity ETFs. On May 7, these funds collectively attracted $5.83 billion in net inflows, according to ETF.com. VTI alone pulled in $248.7 million. Reuters, citing LSEG Lipper data, reported that global equity funds have now posted seven consecutive weeks of inflows through May 6, fueled by solid earnings, AI enthusiasm, and gains concentrated in a handful of mega-cap stocks.
What VTI and ITOT Offer
VTI tracks the CRSP U.S. Total Market Index, holding 3,507 stocks as of March 31. ITOT follows the S&P Total Market Index, with BlackRock reporting 2,509 names. Both funds charge the same 0.03% annual expense ratio, making them among the cheapest ways to own the U.S. stock market. The key difference lies in index construction: Vanguard uses CRSP indices, while iShares opts for S&P, but both end up with portfolios dominated by large U.S. companies.
Brendan McCann, associate analyst at Morningstar, described VTI as "a one-stop shop for all US stocks," highlighting its low fee and streamlined portfolio for long-term investors. He noted that market-cap weighting keeps turnover low but leaves investors vulnerable if a few large stocks dominate performance.
The Tech-Heavy Twist
Despite being "total market" funds, both VTI and ITOT carry significant exposure to technology stocks. Vanguard's March fact sheet shows that VTI's ten largest holdings—including Nvidia, Apple, Alphabet, Microsoft, and Amazon—accounted for 33.4% of the portfolio. Technology alone made up 36.3% of the fund. This concentration means that even broad-based ETFs are heavily tilted toward a handful of mega-cap tech names.
Jamie McGeever at Reuters, citing Morgan Stanley data, pointed out that the biggest 10 U.S. stocks now represent roughly one-third of the entire market's value. The AI-driven rally has amplified this trend, leaving passive funds with outsized exposure to tech. Should any of these giants stumble on earnings or if AI enthusiasm fades, even broad ETFs could take a hit.
Competition and Market Context
While VTI and ITOT dominate the total market space, competition remains fierce. On May 7, the Vanguard S&P 500 ETF (VOO) hauled in $1.46 billion, outpacing VTI and underscoring the appeal of classic large-cap exposure. Schwab's U.S. Broad Market ETF (SCHB) also stays competitive with a 0.03% expense ratio, 2,419 holdings, and $42.1 billion in net assets.
Bulls can point to supportive earnings. HSBC raised its S&P 500 year-end target to 7,650 on Monday, citing steady profit growth. However, the bank's strategists cautioned that "while earnings remain supportive, sentiment is on shakier ground."
For long-term investors, the choice between VTI and ITOT may not be critical. VTI offers a broader slate of holdings, while ITOT provides similar coverage through BlackRock's iShares platform with tight trading fees. But the core trade—cheap access to the U.S. market—now carries a twist: buying into almost the entire market ends up loading up on just a handful of major outperformers.
