iShares vs. Vanguard

[eufo]

Ok, I'm currently investing the stock portion of my portfolio into Vanguard ETFs, but after some analysis, I'm thinking iShares looks like the better deal. I'm going to share why I think that and I'm looking for anything I may be missing here.

I'm splitting my exposure into 3 parts... large/mid/small cap (all blends).

Vanguard:
Large - VOO - $63.8B Assets - 0.05% ER
Mid - VO - $18.4B Assets - 0.09% ER
Small - VB - $17.6B Assets - 0.09% ER

iShares:
Large - IVV - $101.2B Assets - 0.04% ER
Mid - IJH - $38.4B Assets - 0.07% ER
Small - IJR - $29.4B Assets - 0.07% ER

So iShares has more assets/liquidity and a smaller ER for all 3 funds. This is already a good enough reason in my book to change, but then I also discovered that the Vanguard funds have a lot of overlap, while the iShares funds have none. I used this tool: http://www.etfresearchcenter.com/tools/overlap.php to discover the following:

VOO vs. VO = 229 overlapping constituents (45% of VOO's holdings, 67% of VO's holdings) <-- this is pretty bad
VO vs. VB = 20 overlapping constituents (6% of VO's holdings, 1% of VB's holdings) <-- not bad
VOO vs. VB = 28 overlapping constituents (6% of VOO's holdings, 2% of VB's holdings) <-- not bad, but kind of weird, right?

IVV vs. IJH = 0 overlapping constituents
IJH vs. IJR = 0 overlapping constituents
IVV vs. IJR = 0 overlapping constituents

Thoughts?

[Kbg]

Ummm...is there any question? I think you laid out a pretty clear case for the correct choice.

[mathjak107]

if you are holding in a brokerage account you may want to look in to tax efficiency between them .

many index fund's don't hold everything in them so they swap holdings creating tax liability . i posted a chart of some s&p 500 funds in another thread . the difference between the lowest and highest in tax liability from turnover was amazing .

[dualstow]

eufo, if you're going to buy large, mid AND small, why not just buy the whole market, i.e., VTI? No overlap.

[mathjak107]

lots of reasons .
even in a bull market when small and mid caps soar there is little difference between just an s&p 500 fund and a total market fund . just 50 stocks can control the other 450 in the s&p500 . the s&p determines 80% of the wilshire so in reality just 50 stocks can control all 4950 other stocks in a total market fund .

depending on the index tracked there can be a huge difference between buying a small cap blend vs buying index's like the s&p small cap value 600 fund in volatility and potential gains or losses up or down . .

holy cow , i own slyv and compared to a small cap blend this index can swing 2 to 3x the s&p 500 moves daily . a typical diversified small cap blend moves a lot less

my small cap value fund slyv was up 32% last year vs 22% for the small cap 600 growth ijr . iwm the the blend clocked in at 22% and vanguard vb at 18% .

so by carefully choosing the index's you can get much better or worse performance and have the equity allocation act like far more dollars .

owning both slyv and ijr gave you better performance than iwm the blend . coupled with an s&p fund they would have blown away a total market fund last year .

[grapesofwrath]

The difference in those fees is "noise" and shouldn't be a deciding factor. Buy a total index, since its more tax efficient as it avoids forced sale of shares as they move in and out the index. Then add an additional small/mid fund to tilt (+add risk) if you desire.
(fyi on US side I use VTSAX and VTMSX; on non-US I use VFWAX, VFSVX and VEMAX. I use mutual funds instead of ETFs since I'm old fashioned and don't see the need to view them as "trading stocks". Vanguard funds have identical tax efficiency as ETFs)

[mathjak107]

many s&p 500 funds and total market funds are not good at tax efficiency .

few funds own everything in the index . they own the heavy hitters and attempt to cature the return with a lot less stocks . some trade more than others . vanguard is very good , schwab's one of the worst for example .

[mathjak107]

Ok, I'm currently investing the stock portion of my portfolio into Vanguard ETFs, but after some analysis, I'm thinking iShares looks like the better deal. I'm going to share why I think that and I'm looking for anything I may be missing here.

I'm splitting my exposure into 3 parts... large/mid/small cap (all blends).

Vanguard:
Large - VOO - $63.8B Assets - 0.05% ER
Mid - VO - $18.4B Assets - 0.09% ER
Small - VB - $17.6B Assets - 0.09% ER

iShares:
Large - IVV - $101.2B Assets - 0.04% ER
Mid - IJH - $38.4B Assets - 0.07% ER
Small - IJR - $29.4B Assets - 0.07% ER

So iShares has more assets/liquidity and a smaller ER for all 3 funds. This is already a good enough reason in my book to change, but then I also discovered that the Vanguard funds have a lot of overlap, while the iShares funds have none. I used this tool: http://www.etfresearchcenter.com/tools/overlap.php to discover the following:

VOO vs. VO = 229 overlapping constituents (45% of VOO's holdings, 67% of VO's holdings) <-- this is pretty bad
VO vs. VB = 20 overlapping constituents (6% of VO's holdings, 1% of VB's holdings) <-- not bad
VOO vs. VB = 28 overlapping constituents (6% of VOO's holdings, 2% of VB's holdings) <-- not bad, but kind of weird, right?

IVV vs. IJH = 0 overlapping constituents
IJH vs. IJR = 0 overlapping constituents
IVV vs. IJR = 0 overlapping constituents

Thoughts?

very very interesting about the overlap

[dualstow]

Jak, you responded with the benefits of overweighting Smallcap value. I want to know why OP owns the whole market, in pieces. All sizes, as blends.

Confucius say overweighting everything overweights nothing.

[mathjak107]

like i said look at the butterfly . equal dollars are put in the s&p 500 and small cap value .

the tilt and bang for the buck by going that route instead of just a total market fund is what gives the portfolio the edge .

it would not behave the same using say a total market fund vs using very specific index's in the mid cap and small cap arena .

the holdings and weightings in various index's differ .

don't forget even the biggest small cap rally's have a tiny effect on a total market fund because of how it is weighted . you may see a point or perhaps 2% difference between the s&p and total market fund . but buy a few of these other index's that follow different issues and are weighted differently and you can see a huge difference .

as i pointed out above , buying the i-shares iwn which is a blend , is not the same as splitting the money between the i-shares slvy vthe small cap value fund and its growth counterpart ijr . very different results

[sophie]

I personally stick with total market funds (VTI, FSTVX, etc) for simplicity, but I added a small cap blend fund in taxable for two reasons that may be relevant here.

First, I have automated monthly investments set up, which means I'm dollar cost averaging. This yields greater benefits when done with a volatile investment, and small cap is certainly more volatile than total market.

Second, the small cap fund has a lower dividend than the total market fund. This reduces the tax bite, as ordinary dividends from stock funds are a b***ch at tax time.

As far as vanguard vs ishares...Fidelity doesn't allow auto investing with ETFs, not sure if that's the case with Vanguard but you should check, if this is something you want to do.

[mathjak107]

dollar cost averaging only is good when things are volatile and dip below your average price . last year small cap funds like slvy were up 32% .

dollar cost averaging in if you had a choice of lump sum may have left you pretty far behind .

dollar cost averaging generally produces lower returns but somewhat less volatility .

if dollar cost averaging really worked better we would all just hit our desired allocation , sell everything and start from zero again .

it is generally done that way because we have no choice until our later years when our investment fuel tanks are a lot fuller .. then we have a choice if we make changes to our portfoiio .

personally i never dollar cost average in if i change things.with markets up 2/3's of the time and down 1/3 you could be betting against the house ,especially with equity's .

[eufo]

eufo, if you're going to buy large, mid AND small, why not just buy the whole market, i.e., VTI? No overlap.

According to Tyler's site, mixing the 3 blends comes out on top of the total stock market long term (8.5% vs. 7.4% average return). The research I've done seems to support that.

[dualstow]

Ah, thank you.
I'd guessed wrong, as I thought maybe you were going to overweight one part. It's all I could come up with.

I actually own three blends, but only because I was patching up a portfolio rather than starting from scratch.

like i said look at the butterfly

Nope, you did not. Of course, if you had, you'd be off track anyway.

[mathjak107]

depends !
dollar cost averaging in is not best if gains are important , i am not saying this is sophie's case but anytime general terms like " best for buying volatile assets are used some may take that meaning to mean always the best way .

dca is done because you either have no choice because you do not have the lump sum or you want to cut a bit of risk possibly .

if it was really "best " for buying volatile assets we would all just reach our desired allocation , sell everything to zero and start over .

obviously you can see that would likely not be "best " in all aspects .

[smither17]

Take the Fidelity move, for instance. It is particularly useful for financial specialists who have effectively chosen that an extensively expanded arrangement of iShares ETFs is ideal for them, and they mean to keep making customary commitments to their portfolio. In the event that speculators keep making month to month commitments of $1,000 to any of these assets, their yearly returns expanded by just $96 every year, or about 0.83%. Aggravated more than quite a long while, these investment funds turn into a material advantage.

Obviously, that same speculator could have been utilizing file shared assets, which are generally accessible and have for quite some time been accessible without commission expenses. In any case, utilizing shared finances in an assessable record implies that you would relinquish the considerable tax cuts and intraday liquidity that ETFs give. Concerning financial specialists making incessant commitments, the commission waiver puts the two items on equivalent balance from a commitment point of view, and I trust that the item structure separation will convert into numerous speculators now picking ETFs over list reserves.