From an investor’s point of view, large cap stocks have historically played a very important role in asset allocation for retirement investments such as IRA investments or 401K investments. Most professional portfolio and fund managers use large cap stocks as a cornerstone of their portfolio creation strategy. Large cap stocks are known to offer stability and capital protection to any long-term investment portfolio. In the current parlance, any stock with a market capitalization greater than $10 billion is considered a large cap stock.
Large cap blend ETFs usually consist of high quality stocks that are of reasonable valuation and earnings growth perspective. In the current uncertain economic environment, these ETFs are expected to outperform among other stock style ETFs. For instance, in the last financial year, U.S. large cap blend ETFs have outperformed all asset classes with the exception of gold and treasuries. This can be seen in the following two tables:
Major Asset Classes Trend (as of 11/04/2011)
Description | Symbol | 1 Week | 4 Weeks | 13 Weeks | 26 Weeks | 52 Weeks | Trend Score |
US Stocks | VTI | -2.21% | 9.36% | 5.21% | -6.2% | 5.48% | 2.33% |
Emerging Market Stks | VWO | -2.89% | 13.43% | -3.83% | -13.87% | -11.53% | -3.74% |
International REITs | RWX | -4.16% | 6.17% | -3.75% | -12.53% | -8.81% | -4.62% |
Frontier Market Stks | FRN | -2.97% | 9.1% | -2.88% | -10.96% | -19.91% | -5.53% |
International Developed Stks | EFA | -6.24% | 5.76% | -3.61% | -14.26% | -9.95% | -5.66% |
U.S. Equity Style Trend (as of 11/04/2011)
Description | Symbol | 1 Week | 4 Weeks | 13 Weeks | 26 Weeks | 52 Weeks | Trend Score |
Russell Largecap Growth | IWF | -1.73% | 8.84% | 5.82% | -3.92% | 6.49% | 3.1% |
Russell Largecap Index | IWB | -2.3% | 8.83% | 5.15% | -6.11% | 4.23% | 1.96% |
Russell Largecap Value | IWD | -3.02% | 9.0% | 4.48% | -8.22% | 1.93% | 0.83% |
Russell Midcap Growth | IWP | -1.49% | 11.93% | 7.04% | -7.7% | 7.41% | 3.44% |
Russell Midcap Indedx | IWR | -1.64% | 11.7% | 6.36% | -8.22% | 4.84% | 2.61% |
Russell Midcap Value | IWS | -1.87% | 11.28% | 5.62% | -8.91% | 3.28% | 1.88% |
Russell Smallcap Growth | IWO | -1.58% | 14.62% | 6.52% | -8.99% | 6.26% | 3.37% |
Russell Smallcap Index | IWM | -1.88% | 13.89% | 4.99% | -9.8% | 2.49% | 1.94% |
Russell Smallcap Value | IWN | -2.28% | 13.54% | 3.4% | -10.53% | -1.25% | 0.58% |
More information about the latest growth numbers for various asset classes can be found here.
Let us now discuss the prominent Large Cap blend ETFs currently trading in the U.S. market.
U.S. Large Cap Blend
11/04/2011
Description | Symbol | 1 Yr | 3 Yr | 5 Yr | Avg. Volume(K) | 1 Yr Sharpe |
SPDR S&P 500 | SPY | 3.63% | 9.55% | 0.0% | 317,715 | 20.58% |
iShares S&P 500 Index | IVV | 4.67% | 11.08% | 0.18% | 5,359 | 27.69% |
Vanguard Total Stock Market | VTI | 5.95% | 12.14% | 1.19% | 3,423 | 32.3% |
iShares Russell 1000 | IWB | 4.61% | 10.77% | 0.23% | 2,192 | 26.36% |
Rydex S&P Equal Weight | RSP | 5.24% | 16.13% | 1.84% | 1,894 | 25.67% |
iShares S&P 100 | OEF | 4.09% | 8.72% | -0.54% | 992 | 25.84% |
Vanguard Large Cap | VV | 4.81% | 11.33% | 1.14% | 439 | 27.62% |
Schwab U.S. Large Cap | SCHX | 4.65% | NA | NA | 395 | 26.87% |
Vanguard S&P 500 | VOO | 4.78% | NA | NA | 668 | 28.18% |
Considering the statistics given in the above-given list, it is obvious that the Vanguard Total Stock Market ETF (VTI) is currently the best performing U.S. large cap blend ETF. At the same time, we must not ignore the giant in the room – the SPDR S&P 500 ETF-- which is benchmarked to the S&P 500 index and accounts for a lion’s share of the average trading volume (317,715), currently making it the most liquid U.S. large cap blend ETF .
VTI has given the highest returns for the last one, three and five year periods compared to the other ETFs in the list. Additionally, VTI also has the highest Sharpe ratio (32.3%) making it the best managed ETF in the list. VTI is benchmarked to the MSCI US Broad Market Index; which was specifically formulated to represent the U.S. stock market as a whole.
Please refer to the following table to examine the latest sector-wise portfolio allocation for VTI.
Sector Weightings:
| Sector | VTI (%) |
| Basic materials | 4.23 |
| Consumer cyclical | 10.34 |
| Financial services | 13.06 |
| Realestate | 2.94 |
| Consumer defensive | 9.82 |
| Healthcare | 11.32 |
| Utilities | 3.33 |
| Communication services | 4.04 |
| Energy | 11.38 |
| Industrials | 13.04 |
| Technology | 16.51 |
VTI has a superb balance of aggressive growth sectors like technology (16.51%), financial services (13.06) and energy (11.38%) along with classic defensives like utilities (3.33%), consumer cyclicals (10.34%) and consumer defensives (9.82%). Additionally, the top ten holdings of VTI represent 17.08% of total assets and they include a mix of energy behemoths like Exxon Mobil (XOM) (2.82%), Chevron Corp. (CVX) (1.44%); technology stocks like Apple Inc. (AAPL) (2.06%), Microsoft Corp. (MSFT) (1.31%), IBM (1.39%) and financials like Bank of America (BAC) (1.25%).
Taking into account VTI’s asset allocation and top holdings, we can conclude that in the current low interest rate environment, VTI will continue to outperform other U.S. large cap blend ETFs as the economy improves and unemployment declines. Both VTI and SPY make great additions to any serious long-term investment portfolio including IRA investments and 401K investments.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Disclaimer: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.
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