Choosing the Right ETF for Beginners: Total Market Exposure Versus Value-Focused Strategies

Understanding Two Popular Market Approaches

When starting with ETF investing for beginners, many investors face a fundamental decision: should you cast a wide net across the entire market, or focus on established value companies? The iShares Core S&P Total US Stock Market ETF (NYSEMKT:ITOT) and Vanguard Value ETF (NYSEMKT:VTV) represent two distinct philosophies. ITOT provides comprehensive U.S. market coverage spanning all company sizes and styles, while VTV concentrates on large-cap value stocks offering potential stability and income.

Performance Tells a Different Story

Over the past five years, the choice between these approaches has mattered significantly. An initial $1,000 investment in ITOT would have grown to approximately $1,707, compared to $1,606 in VTV—a meaningful difference. However, this outperformance comes with a tradeoff: ITOT experienced a maximum drawdown of 27.57% during market downturns, while VTV’s drawdown reached 53.7%. This suggests that broad market exposure, while rewarding over time, carries different volatility characteristics.

In the trailing 12 months (as of December 17, 2025), ITOT returned 11.67% versus VTV’s 12.66%, showing that value stocks have recently caught up after years of technology dominance.

Cost and Income Considerations

For ETF investing for beginners seeking affordability, both funds are remarkably inexpensive. ITOT charges just 0.03% annually, edging out VTV’s 0.04% expense ratio—a negligible difference in practical terms. However, income-focused investors notice VTV’s advantage: its 2% dividend yield doubles ITOT’s 1.09% yield. This reflects VTV’s concentration in dividend-paying sectors like financial services and industrials.

ITOT manages $80.39 billion in assets, while VTV oversees a substantially larger $215.5 billion, suggesting institutional confidence in both strategies.

Portfolio Composition: Breadth Versus Focus

ITOT’s strength lies in comprehensiveness. With 2,498 holdings spanning more than 21 years of operation, this fund captures the entire U.S. equity market. Technology dominates at 34% of assets, followed by financial services and consumer cyclicals. The fund’s largest positions—Nvidia (NASDAQ:NVDA), Apple (NASDAQ:AAPL), and Microsoft (NASDAQ:MSFT)—reflect current market leadership but also concentrate bets on the sector driving recent gains.

VTV takes a contrarian tilt. Its top three holdings—JPMorgan Chase (NYSE:JPM), Berkshire Hathaway (NYSE:BRK.B), and Johnson & Johnson (NYSE:JNJ)—showcase established blue-chip quality. Financial services comprise 22% of assets, industrials 16%, and healthcare 15%. This composition appeals to those seeking steadier performance with less dependence on growth narratives.

Which Strategy Fits Your Goals?

For ETF investing for beginners prioritizing long-term wealth building, ITOT’s market-cap-weighted approach means you’re automatically overweighting whatever the market deems most valuable—currently technology. This has been rewarding but requires comfort with sector concentration.

VTV suits different objectives. Its higher dividend yield transforms it into an income-generating engine, while its value orientation may provide a hedge during periods when growth stocks underperform. The established companies in VTV’s portfolio tend to be less volatile during economic uncertainty.

The Practical Reality

Both funds operate with institutional-grade efficiency. Ultra-low expense ratios mean fees won’t significantly erode returns over decades. ITOT offers instant portfolio diversification across thousands of companies and market segments. VTV provides a more curated basket emphasizing financial stability and income generation.

For beginning investors, neither choice is wrong—the decision hinges on whether you want maximum market exposure with growth-sector emphasis, or a more conservative selection of proven dividend-payers. Most financial advisors suggest that either fund serves as an excellent core holding in a long-term portfolio, requiring minimal monitoring of individual sector trends or company performance.

The five-year track record suggests that betting on the entire market has slightly outpaced value-focused strategies, but the difference narrows when considering volatility and income. Your personal risk tolerance and income needs should guide the final decision.