Australian investors looking for simple access to the US share market have several exchange-traded funds to choose from, but two of the most prominent options are the Vanguard Morningstar US Total Market Shares Index ETF (ASX: VTS) and the iShares S&P 500 ETF (ASX: IVV).
At first glance, VTS appears to offer a much broader investment universe. While IVV focuses on approximately 500 of America’s largest listed companies, VTS provides exposure to more than 4,000 US stocks across large, mid-sized and smaller companies.
That raises an obvious question for investors: does owning thousands more companies make VTS the superior way to invest in America?
The answer is more complicated than simply comparing the number of holdings.
VTS Offers Much Broader Market Coverage
The key difference between the two ETFs lies in the indices they follow.
IVV tracks the S&P 500 Index, one of the world’s best-known share market benchmarks. The index consists of roughly 500 of the largest listed US companies and weights them according to market capitalisation.
VTS, meanwhile, tracks the Morningstar U.S. Total Market Index.
Instead of concentrating primarily on America’s largest companies, the Vanguard fund extends its reach across almost the entire listed US equity market, holding more than 4,000 stocks.
That gives VTS significantly greater exposure to mid-cap and small-cap companies.
From a diversification perspective, this broader coverage can appear attractive because investors are not relying exclusively on the largest corporations.
However, the way both funds are constructed means the practical difference is less dramatic than the headline number of holdings might suggest.
Largest US Companies Still Dominate Both ETFs
Both VTS and IVV use market-capitalisation weighting.
Under this approach, America’s largest listed businesses receive far greater portfolio weight than smaller companies.
As a result, the same technology and consumer giants dominate both ETFs.
As of 31 July 2026, IVV’s largest holding was NVIDIA, accounting for approximately 7.53% of the portfolio.
Apple represented around 7.03%, followed by Alphabet at 5.85%, Microsoft at 5.35% and Amazon at 4.12%.
VTS held almost exactly the same companies at the top of its portfolio.
NVIDIA represented around 6.39% of VTS, Apple 6.28%, Alphabet 5.2%, Microsoft 4.78% and Amazon 3.64%.
The weightings are slightly lower in VTS because its assets are spread across thousands of additional companies.
Nevertheless, both ETFs remain heavily influenced by the performance of America’s biggest businesses.
Broader Diversification Does Not Completely Change the Portfolio
The extra companies held by VTS provide additional exposure to areas of the US share market that IVV does not cover extensively.
However, most of those smaller businesses account for relatively tiny individual positions.
That means their performance has a much smaller impact on the total fund than movements in companies such as NVIDIA, Apple, Microsoft, Alphabet and Amazon.
For investors, the result is that VTS may technically be much more diversified, but its overall investment behaviour can still look surprisingly similar to IVV.
If the largest US technology companies experience strong gains, both ETFs are likely to benefit significantly.
Likewise, if the mega-cap stocks suffer a major downturn, both funds could feel substantial pressure.
Returns Have Been Very Similar
Recent performance also demonstrates how closely the two funds can track one another.
For the 12 months to 31 July 2026, IVV delivered a return of approximately 9.42%.
Its annualised return over three years was around 17.41%, while its five-year annualised return was approximately 13.61%.
Over the same one-year period, VTS returned approximately 9.82%.
Its annualised three-year return was around 17.19%, while its five-year annualised return was approximately 12.77%.
The differences are relatively small.
VTS slightly outperformed over the most recent 12-month period, while IVV held a modest advantage over the longer three- and five-year periods cited.
These figures reinforce the view that choosing between the two funds may come down more to portfolio structure and investor preference than expectations of dramatically different returns.
IVV Remains the More Popular ASX Option
IVV is currently the dominant choice among Australian investors seeking US exposure through the ASX.
The fund has more than $14 billion in assets under management, making it one of the most widely held international equity ETFs available to Australian investors.
Its appeal is straightforward.
The S&P 500 provides exposure to many of the world’s largest and most profitable companies, and the index has become a standard benchmark for US equity investing.
Investors who believe America’s biggest companies will continue driving long-term market returns may therefore see little reason to go beyond the S&P 500.
Where VTS May Have an Advantage
VTS could appeal more strongly to investors who want exposure to the entire US market rather than only its largest companies.
Its thousands of additional holdings provide access to smaller businesses that could potentially develop into tomorrow’s market leaders.
This also reduces the fund’s concentration in the current mega-cap companies compared with an S&P 500 portfolio.
If smaller and mid-sized US companies outperform large-cap stocks for an extended period, VTS could potentially benefit more from that shift.
However, because those companies start with much smaller portfolio weights, their impact may still be gradual.
The Decision Comes Down to Investment Preference
There is no clear evidence from the recent performance figures that one of these ETFs is overwhelmingly superior.
VTS delivers broader market coverage, while IVV offers a more concentrated portfolio of America’s largest companies.
Despite those structural differences, their market-cap weighting means both funds remain dominated by many of the same stocks.
For Australian investors seeking inexpensive and convenient exposure to the US share market, both ETFs can serve a similar core purpose.
VTS may suit those who prefer owning virtually the entire American equity market, including thousands of smaller businesses.
IVV may be more attractive to investors who are comfortable concentrating on the largest and most established US companies.
Ultimately, the choice between the two is less about deciding which fund owns more shares and more about deciding how broad an investor wants their US market exposure to be.
This article is general information only and does not constitute personal financial advice. Past investment performance is not a guarantee of future returns.
