If you’re balancing VTI vs. VOO, you’re probably looking at putting money into an index fund. That’s generally going to be a good decision. Index funds allow you to diversify your portfolio even if you don’t have much to invest, and even investment professionals often fail to pick stocks that beat the index performance.
But which of these funds should you choose? Let’s start with the basics.
VTI | VOO | |
---|---|---|
Full Name | Vanguard Total Stock Market ETF | Vanguard S&P 500 ETF |
Index Tracked | CRSP U.S. Total Market Index | S&P 500 Index |
Assets Under Management* | $318.6 billion | $339.7 billion |
Number of Holdings | 3839 | 507 |
Expense Ratio | 0.03% | 0.03% |
Dividend Yield* | 1.54% | 1.56% |
Issuer | Vanguard | Vanguard |
* As of Sept. 2023
Source: Barchat
The most important difference between VTI and VOO is that each fund tracks a different index:
These indices and the ETFs that track them are market cap weighted. That means that they give larger companies a heavier weight.
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VTI and VOO use slightly different terms to break down their sector exposure.
Sector | Weight |
---|---|
Information Technology | 30.20% |
Consumer Discretionary | 14.40% |
Industrials | 13.00% |
Health Care | 12.60% |
Financials | 10.30% |
Consumer Staples | 5.10% |
Energy | 4.60% |
Real Estate | 2.90% |
Utilities | 2.70% |
Telecommunication | 2.20% |
Basic Materials | 2.00% |
Sector | Weight |
---|---|
Technology | 28.20% |
Health Care | 13.20% |
Financials | 12.40% |
Consumer Discretionary | 10.60% |
Communication Services | 8.80% |
Industrials | 8.40% |
Consumer Staples | 6.60% |
Energy | 4.40% |
Real Estate | 2.50% |
Basic Materials | 2.50% |
Utilities | 2.40% |
One thing that immediately stands out in these breakdowns is that both VTI and VOO are heavily weighted toward IT (tech & communication) especially VOO, reflecting the current large market capitalization of these sectors in the US stock market.
Neither of these options is fundamentally better or worse. They provide exposure to slightly different sectors of the market, and that can lead to different performance characteristics.
VTI and VOO have a lot in common. They are both extremely large ETFs. Both funds are managed by Vanguard, which has a reputation for providing low-cost funds.
If you’re looking for large, highly liquid funds with credible management, both of these ETFs will pass your screen.
There are also less obvious similarities, explaining the very similar performance charts stemming from three basic facts.
What does that mean in practice? Let’s look at the ten largest holdings of VTI and VOO.
The top holdings of both indexes are identical for the first 9th largest holdings, only in a slightly different order. It includes:
So the only difference among the top 10 holdings is that VTI contains insurance and healthcare stock UnitedHealth Group while VOO contains oil & gas Exxon Mobil Corp.
The same can be true even if looking at the next 10 holdings for each fund. The list is identical for 9th of them, with a very similar order:
The difference is in the 20th largest holdings: pharmaceutical company Merck & Co Inc. for VTI and energy company Chevron Corp. for VOO.
The only real difference is for the top holdings of VTI to be slightly less of the whole ETF, making space for the smaller holdings of smaller companies.
Both VTI and VOO are good choices for an investor who is looking for a quality diversified index fund. Both are among the largest and most prominent ETFs in the country, both are highly liquid, and they have very similar track records. They also have the same low fee of 0.03%.
Your choice will be based on what you are looking for in an investment.
How you see the markets makes a difference: if you think markets are going to keep favoring large caps, then you will prefer an index focused solely on them. If you believe that smaller companies might be able to outperform, you will prefer an index able to rebalance toward them and increase their weight into the index while their market capitalization grows.
If you are weighing VTI vs VOO and you’re having trouble making up your mind, consider allocating a portion of your portfolio to each fund. Keeping several ETFs in your portfolio can provide the best of both worlds.
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