A Low-Cost, Core Equity Portfolio From iShares
This fund is a one-stop shop for exposure to U.S. equities.
IShares Core S&P Total US Stock Market (ITOT) provides convenient and low-cost exposure to U.S. stocks and can serve as a core equity holding. The S&P 1500 Index that this fund tracks does not include as many small- or micro-cap stocks as other U.S. broad or total stocks market indexes from Russell or CRSP. This less comprehensive coverage may slightly reduce the fund's diversification and return potential. However, these omitted stocks should have only a limited impact because of their small total size in any market-cap-weighted index. Additionally, the S&P index committee applies some screens that make certain unprofitable companies ineligible for addition to its indexes. Despite their differences, broad stock market indexes tend to be highly correlated and have had similar long-term performance.
A broad index fund is a better option for investors building a complete allocation to U.S. equities than using separate size segment funds. Because a broad fund holds both large- and small-cap stocks, it is not forced to buy or sell as stocks migrate into a different market-cap range. This low turnover can promote tax efficiency. However, separate size segment funds may be viable for investors who prefer to more tightly control their allocation or to give an overweighting to certain segments of the market.
Michael Rawson does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.