Investors interested in broad-market exposure may find themselves deliberating between the Vanguard Total Stock Market ETF and the Schwab U.S. Broad Market ETF, both lauded for their low cost and extensive diversification across the U.S. equity market. While they share many similarities in terms of performance and sector allocations, they also exhibit differences in size and the number of holdings.
Both ETFs target the entire U.S. equities landscape, including large-, mid-, and small-cap stocks, and feature the same expense ratio of 0.03%, making them exceptionally affordable options. As of the latest figures, the Vanguard Total Stock Market ETF (VTI) boasts an impressive $565.8 billion in assets under management (AUM), vastly outpacing the Schwab U.S. Broad Market ETF (SCHB), which has $37.1 billion in AUM.
In terms of performance, both funds have offered comparable returns. As of the most recent data, VTI reported a one-year return of 13.8%, while SCHB was slightly behind at 13.7%. When viewed over five years, both funds demonstrate almost identical risk profiles, with a maximum drawdown of -25.37% for VTI and -25.36% for SCHB. A hypothetical $1,000 investment made five years ago would have grown to approximately $1,591 in VTI, compared to $1,595 in SCHB.
Analyzing their portfolio compositions reveals that SCHB, which tracks the Dow Jones U.S. Broad Stock Market Index, includes 2,401 companies, predominantly in the technology sector (32%), followed by financial services (11%) and healthcare (10%). Key holdings in SCHB feature prominent tech giants like Nvidia Corp, Apple Inc, and Microsoft Corp.
Conversely, VTI, which tracks the CRSP US Total Market Index, expands its reach to a broader array of 3,598 stocks, with similar sector allocations yet a higher focus on small-cap exposure. It, too, lists Nvidia, Apple, and Microsoft among its top holdings, mirroring the weightings found in SCHB.
For investors weighing their options, both ETFs stand out as excellent choices for incorporating balanced total-market exposure. While VTI ranks higher due to its larger scale, more holdings, and slightly better dividend yield (1.2% compared to SCHB’s 1.1%), SCHB’s marginally better performance over the last five years may appeal to different investor strategies.
Ultimately, the decision between VTI and SCHB may hinge on personal preferences, given that both ETFs deliver similar benefits at a fraction of the cost and risk. These attributes make either fund a strong addition to a diversified investment portfolio.
