Mutual funds, index funds, and exchange-traded funds should be a staple of serious investors’ portfolios. Both are safer investments than any single stock and can offer diversification. You can spend hours or days sifting through hundreds if not thousands of different funds. Or you can opt for two proven funds, VTI versus VOO.
There is no doubt that Vanguard offers some of the most popular mutual funds and ETFs. Two of these options are VTI (Vanguard Total Stock Market Index ETF) and VOO (Vanguard S&P 500 EFT). Nothing says you can invest in both funds, but which one is better?
VTI vs VOO: Publisher
If we look at VTI vs VOO from the publisher’s standpoint, there is no difference. Both VTI and VOO are Vanguard funds. If you’ve never heard of Vanguard, you’ve probably been living under an investment rock somewhere.
Vanguard, headquartered in Pennsylvania, is the largest mutual fund publisher in the world. It is also the second largest issuer of exchange-traded funds. With over 7 trillion in assets under management (AUM), Vanguard is alone behind BlackRock in that category.
It is safe to say that Vanguard is not a fad or an investment company that is invested overnight. Founded in 1975, it has over 45 years of industry history and experience to give you the confidence you need to invest with them.
VTI vs VOO: underlying index tracked
VTI appears to be tracking the CRSP US Total Market Index. This means that it tends to follow the market as a whole. As the market rises and falls, so will VTI. By tracking the market as a whole, this means that a fund will have thousands of different stocks with different cap sizes (small cap stocks, mid cap and large cap stocks) and in different sectors. These stocks are also usually spread across different growth and value styles.
VOO, on the other hand, aims to track the S&P500 market index. The S&P 500 is designed to track the 500 leading publicly traded US companies. Market capitalization is the primary criterion for a company to be included in the S&P 500 index fund, but it is not the only criterion.
If we look at VTI versus VOO, since the VOO only tracks 500 stocks, it will be less diversified than VTI. However, following the S&P 500 is considered one of the best investment strategies out there.
VTI versus VOO: expense ratios
Another aspect to consider when investing in a mutual fund is the expense ratio. A fund’s expense ratio can be an essential piece of information, as it can affect your overall return. Essentially, when funds are managed, there are costs associated with them. This can be paid to pay analysts or portfolio managers, management fees, rent for office space and many others. Usually these costs are passed on to the investors. The amount of the costs is included in the expense ratio.
If we look at VTI versus VOO from an expense ratio point of view, a new stalemate arises. Both funds are passively managed and behave more like index funds. When a fund is passively managed, the associated costs and fees can be drastically reduced.
Both VTI and VOO have some of the lowest expense ratios you will find and a meager 0.03%. This means that for every $1000 you invest, you have to pay $3 in fees, not too shabby if you ask me.
VTI vs VOO: Minimum Initial Investment
Minimum initial investments vary between different funds and companies. It should be noted that the key word here is initial investment. Many funds require anywhere from $100 to $5,000 or more for your initial investment. You are then free to invest any amount you want in subsequent investments with the same fund.
Again, VTI vs VOO brings a tie in this comparison. Both funds require a minimum initial investment of the current asking price for one share of the fund.
While they both require the purchase of one share, this does not mean they are 100% equal in this category. At the time of writing, VTI is currently at about $224 a share, while VOO sits at a much high $409. Depending on how much you wanted to invest, what might be better for you to start with might change.
VTI vs VOO: Net Assets and Participations
When comparing VTI and VOO, the top ten holdings of each fund are identical, see below. The main difference here is that although VTI holds the same funds, it owns approximately 24.7% of its 1.3 trillion (321.1 billion) total assets in these stocks. In comparison, VOO owns about 29.5% of its top ten 808.8 billion, or about 238.6 billion.
VTI vs Voo Top Positions:
CompanySymbolApple IncAAPLMicrosoft Corp.MSFTAlphabet Inc. Cl AGOOGLAmazon.com IncAMZNTesla Inc.TSLANVIDIA Corp.NVDABerkshir Hathaway Inc. Cl BBRK.BMeta Platforms Inc.FBUnitedHealth Group IncUNHJohnson & JohnsonJNJ
VTI versus VOO: compositions
One of the areas where the comparison between VTI and VOO will differ is the composition of the fund. As mentioned before, VTI aims to follow the total market. To do this, there are over 4000 different individual stocks that make up the fund. These stocks can be small-cap, mid-cap or large-cap stocks. The stocks will also have a wide variety of growth and value styles.
VOO, on the other hand, wants to track the S&P500, so the number of individual stocks is much less than VTI. VOO has approximately 507 stocks, mainly large-cap and growth-oriented. Fewer stocks can mean more volatility at VOO when there is more market volatility in general.
VTI vs VOO: Sector Allocations
VTI vs VOO is also similar in sector allocations. As you’ll see below, they share many of the same sectors, with a few exceptions. The percentage of each fund’s allocations to each sector also varies, but remember that VTI holds approximately $500 billion more in assets, so the amounts actually invested may be closer or further apart than you might initially think.
VTI sector assignments:
VOO Sector Assignments:
VTI vs VOO: Overall Performance
So what does it all really come down to for most investors? Performance of course! It doesn’t matter which fund you invest in, it’s certainly good to know what we’ve discussed so far, but it always comes down to how the fund performs.
Returns is where I think we will see a clear win in VTI vs VOO, see below:
Overall VTI Performance:
Overall performance of VOO:
Here we see that VOO has consistently outperformed VTI, which recalls owning fewer assets. One of the reasons for this could be that VOO mainly holds large-cap stocks that are focused on growth. While the overall numbers show it has better growth potential, it also means that during down markets, losses are likely to be greater as well.
VTI versus VOO: which is better?
If you’re going for overall performance, in the matter of VTI versus VOO, in this case, VOO takes home the prize. Perhaps if you’re looking for something a little more secure and stable, the VTI could be your winner here. In any case, there are no losers when investing in VTI vs VOO.
VTI vs VOO: Final Thoughts
Both funds are backed by one of the world’s largest asset managers in Vanguard and are an excellent addition to anyone’s investment portfolio. Each fund also has low expense ratios. It really comes down to whether you want a wider range of stocks than the top 500 in the stock market. Whichever you choose (or both if you prefer), everyone will go home a winner!
Jeff is a fan of all things finance. When he’s not changing the world with his blog, you can find him on a run, playing a Mets game, playing video games, or just playing with his kids.
This post VTI vs. VOO: Which is Better for You?
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