Is the Vanguard VTS ETF a better US shares ETF than IVV?


Companies and indices mentioned:


Is Vanguard VTS ETF (ASX: VTS) the best US shares ETF for Australians on the ASX?

ETFs Vs. LICs – what’s the difference?

The following video from Rask Education explains the difference between Exchange Traded Funds (ETFs) and Listed Investment Companies (LICs).

What is Vanguard?

Vanguard is a funds management business that is owned by its own investors. It was founded in 1975 and now has (or had) around AU$9.7 billion. It has 192 funds in the US, and 232 funds in markets outside the US. It’s a world leader in providing low cost ETFs.

Why Vanguard U.S. Total Market Shares Index ETF could be a good to invest in US shares

If you’re wanting to diversify your portfolio with US shares then this ETF could be one of the best ways to do it. Many ETF investors would know of iShares S&P 500 ETF (ASX: IVV). In some ways they’re similar but in some ways they’re very different.

Why IIV & VTS are similiar

Both ETFs have very low management fees. At the moment the Vanguard U.S. Total Market Shares Index ETF has a slightly cheaper annual management fee of just 0.03%. That’s almost nothing compared to most other management fees charged by Australian fund managers.

When you look at the top holdings of both ETFs the same company names feature prevalently. Tech giants like Microsoft, Apple, Amazon, Facebook, Alphabet, and so on. The biggest businesses in an index will have the biggest influence on the returns of an ETF. These big tech names are the ones that I’d want to have exposure to.

The earnings generated from both ETFs have a global slant. The US is obviously a large part of the global share market, but Apple sells phones all over the world. McDonald’s has outlets across the globe. Visa and Mastercard have payment network infrastructure across the world. And so on.

Both ETFs offer extremely attractive statistics. The Vanguard U.S. Total Market Shares Index ETF has a return on equity (ROE) of 16.9%.

How VTS & IVV are different

As the name suggests, the S&P 500 is invested in 500 businesses. The Vanguard U.S. Total Market Shares Index ETF is invested in over 3,500 businesses. That provides much more diversification and it also means that the Vanguard ETF is invested in many smaller businesses which may mean it is exposed to more growth.

In most other ways they’re quite similar. Not having to complete U.S. tax forms known as “W-8BEN” forms for IVV may also be a factor for some people. Plenty of people may prefer just to go for the fact that Blackrock offers the S&P 500. Whereas others may prefer to associate with and support Vanguard.

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Jaz Harrison

Jaz Harrison

Jaz is a keen investor who loves to thoroughly poke holes in an investment idea before it has a chance of making it into her portfolio. Jaz invests for the long-term and doesn't sweat the small stuff. She strongly believes that empowering people with knowledge is the best way for them to take charge of their finances, which is exactly the approach she takes with her own money and investments.