VTI and SCHB Both Offer Total Stock Market Exposure, But One Might Have an Edge for Some Investors

The Schwab U.S. Broad Market ETF (SCHB 1.01%) and the Vanguard Total Stock Market ETF (VTI 1.03%) look nearly interchangeable for most investors, with matched expense ratios, dividend yields, and performance. However, VTI stands out for its size and slightly broader diversification.

Both funds aim to deliver the full U.S. stock market in a single, low-cost package. While SCHB and VTI track different indexes, both cover large-, mid-, and small-cap stocks and are designed as core building blocks for a diversified portfolio.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500.  The 1-yr return represents total return over the trailing 12 months.

Both funds charge the same 0.03% expense ratio, and neither offers a yield advantage. Investors comparing the two may find the decision comes down to other factors than fees or income.

Performance & risk comparison

What's inside

VTI includes 3,529 stocks and has been around for nearly 25 years, making it one of the oldest and most comprehensive broad-market ETFs. Its sector allocations are typical of the U.S. market, with technology at 34%, financial services at 13%, and consumer cyclicals at 11%. The largest holdings -- Nvidia, Microsoft, and Apple -- each make up less than 10% of the fund's total assets, so no single stock dominates. There are no quirks or unusual constraints to note.

SCHB takes a similar approach, holding 2,435 stocks with a nearly identical sector mix, and its top holdings mirror VTI's. Both funds avoid major tilts, and neither overlays leverage, currency hedges, or ESG screens.

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Foolish take

VTI and SCHB are nearly identical funds in many ways. Factors like the expense ratio, dividend yield, and beta are exactly the same across both funds, and with extremely similar portfolios and past performance, there are few differentiators.

The two most significant differences between the funds are the AUM and the number of stocks. VTI is larger on both accounts, with around 1,000 more holdings than SCHB and a substantially higher AUM -- $2 trillion compared to just $37 billion.

In theory, this makes VTI more diversified than SCHB. That said, both of these ETFs hold thousands of stocks of all sizes from every sector of the market, so even the less diversified option still has more variety than nearly any other ETF available. For practical purposes, then, this difference likely won't make much of a difference for the average investor. But if a higher AUM and more holdings are a priority, VTI has a distinct edge over SCHB.

Glossary

ETF: Exchange-traded fund; a fund that trades on stock exchanges and holds a basket of assets.
Expense ratio: The annual fee, as a percentage of assets, that a fund charges to cover operating costs.
Dividend yield: Annual dividends paid by a fund divided by its current price, shown as a percentage.
Beta: A measure of a fund's volatility compared to the overall market, usually the S&P 500.
AUM: Assets under management; the total market value of assets a fund manages.
Max drawdown: The largest percentage drop from a fund's peak value to its lowest point over a period.
Sector allocation: The percentage of a fund's assets invested in different segments of the economy, like technology or financials.
Core building blocks: Investments intended to form the foundation of a diversified portfolio.
Leverage: Using borrowed money or financial instruments to increase potential returns (and risk).
Currency hedge: A strategy to reduce the impact of currency fluctuations on investment returns.
ESG screens: Criteria that exclude companies based on environmental, social, or governance factors.