VTI vs. VOO: Similarities, Differences [All You Need To Know]

Are you interested in investing in the stock market but have no idea where to start? Why not go with a fund that knows how to manage the risk for you? Let’s find out with VTI vs. VOO in this article.

Investing in the stock market is like buying your stuff in the grocery store. There are so many options to choose from, depending on your budget, needs, and wants. The main difference is that what you buy or invest in the stock market can either help you in your long-term goals or set you back in your life. 

Many people look for an asset, fund, or equity that can provide the best return on investment. But not all such investments can offer you as much. What if an index fund can give you a stable and secure investment in the stock market? Not only that, what if this investment can provide you with an annual dividend to help you moderate the risk in your investment?

This is where the Vanguard Total Stock Market ETF (VTI) and Vanguard S&P 500 ETF (VOO) come into play. This investment can offer you the best investment strategy if you are not too sure about the stock market. Interested? Let’s take a look.

VTI: Vanguard Total Stock Market ETF

The Vanguard Total Stock Market ETF (VTI) is a diversified exchange-traded fund with over 3,500 stocks and over $89.6 billion market capitalization. It aims to track the CRSP US Total Market Index. 

VTI follows the entire investment in the US Equity market and includes small, medium, and big-cap companies. Since it was started in 2010, it has managed 10-year returns of 13.48%. Managed passively, VTI uses an index sampling strategy.

The top sector of the ETF is technology and has a weighted average of 21.2%. The top 3 holdings of the funds make up 12.6% of the fund. Their shares are as follows:

  • Microsoft: 4.8%
  • Apple: 4.1%
  • Amazon: 3.7%
  • Alphabet: 2.8%

The fund’s expense ratio is low at 0.03%, and it tracks the greater stock market closely. This makes it an affordable way of getting exposure to the entire US Equity market. The portfolio has a weighted average price-to-earnings ratio of 20.9 and a price to book ratio of 2.8. 

VTI Characteristics

The Vanguard Total Stock Market ETF is a passive index fund whose expense ratio of 0.03% is generally low. The fund’s turnover rate is lower at 4.1%, meaning that the transaction cost of transferring the fund’s holding is lower. The expense ratio isn’t inclusive of any brokerage fees or commissions. The common expense ratio of the fund is beneficial for long-term investors.

On average, the trade volume of the fund is 2 million shares. This indicates that the ETF has ample liquidity. 

It’s possible to buy VTI shares without any commissions using M1 Finance. M1 Finance has no broker fees or commissions, and you can invest from $100. Sign up here for M1 Finance or read our entire M1 Finance review for more information. 

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How Good Is VTI?

VTI has a big amount of holding, consisting of all the investable securities in the US. Its portfolio also consists of small stocks, which are more volatile than mid or large-cap stocks. 

As compared to the bigger market, the fund’s Beta is one. It can be exposed to the systematic risk that is inherent to the whole market. If there is a big downturn in the US economy, this can impact the fund’s value.

With the big bull run in the stock exchange, the fund has been performing well in the recent past. On average, its yearly return is 11.46%, while its average 5-years returns are 9.17%. The ETF is a great security to hold in a growing portfolio as it reflects the bigger world of securities in the US in one low-cost fund.

As an investor, you may need to invest in other assets unrelated to the stock market to balance your portfolios. As per the modern portfolio theory, you can minimize your portfolio risk. You can invest in gold, peer-to-peer lending, real estate investments, or other appreciating assets that would give you passive income over time.

If you are unsure what the future holds, you may want to allocate some capital to the Vanguard S&P 500 ETF considering the yield. 

VOO: Vanguard S&P 500 ETF

If you would like to achieve gains in the stock market while capping your losses, one of the options you may want to consider is the Vanguard S&P 500 Exchange-Traded Fund (ETF), popularly known as the VOO index fund. This is a popular and reputable fund that is based on the major market index. 

The fund that invests in the S&P 500 Index is highly liquid and has high daily trading volumes. The S&P 500 consists of the 500 biggest companies in the US. The ETF follows the S&P 500 index returns, which is an indicator of the performance of stocks in the United States.

Why Invest In Vanguard S&P 500 ETF (VOO)?

Why are investors attracted to the Vanguard S&P 500 ETF? One of the reasons is that it consists of large-capitalization stocks. This is very important as these stocks are a good choice when the market is on a downward trend. The fund manages assets that are worth over $100 billion. When a market correction happens, many traders and investors rush to invest in these big household names.

Not only is VOO a highly liquid fund, but its daily trading volume is also high. Another reason why VOO appeals to investors is its annual dividend yield of 1.64% and an expense ratio of 0.03%. Since its inception in September 2010, VOO has risen by 268.21%. In the year to date, it has increased by 9.69%.

Allocations Of Vanguard S&P 500 ETF

If you wonder what has led to such a solid and consistent performance, it’s mostly because over one-third of the VOO assets are allocated to the tech sector. The allocations are as follows:

  • Apple Inc.: 4%
  • Microsoft: 5.6%
  • Amazon: 4.8%
  • Alphabet: 3.5%
  • Facebook: 2.3%

The breakdown of the investment by sectors is as follows:

  • Information Technology: 27.5%
  • Healthcare: 14.10%
  • Consumer Discretionary: 11.06%
  • Communication services: 11.1%
  • Financials: 9.8%

VTI Vs. VOO: Composition Differences

One of the biggest drivers of portfolio returns is stocks. Index funds offer a great but low-cost way of diversifying across different classes of assets. 

Vanguard has low fees and has a good reputation of providing accurately tracked EFTs: The Vanguard S&P 500 ETF (VOO). The index is considered to be a good measure of the performance of the US market.

The Vanguard Total Stock Market ETF (VTI) also provides a bigger exposure to the stock market in the United States by including small and medium-capitalization companies. Established in 2001, the fund tracks the CRSP Total Market Index. There is a high relationship between VOO and VTI as the former has a weighted average of around 82% of the latter. 

VTI mainly consists of 82% large capitalization, 12% medium-capitalization, and 6% small stocks. This means that historically, their performances are almost the same. 

On the other hand, VOO is a stock for large capitalization. Since VTI is usually market-cap-weighted, this means that it’s weighted depending on the stocks that make it; about 82% of the bigger VTI consists of VOO. The other 18% is made of smaller companies. In simple terms, VOO is part of VTI, which is a mutual fund equivalent of VTSAX.

Small and medium-capitalization stocks are usually more volatile than large-capitalization. This means that VTI is generally more volatile as compared to VOO. 

Since VOO has more than 500 stocks while VTI consists of more than 3,500 stocks, VTI is more diversified than VOO. The contrasting holdings and subsequent capsize exposure are the main difference between VOO and VTI.

VTI Vs. VOO: A Preview Of Their Historical Performance

Historically, the small and midcap stocks perform better than the large caps as they are considered to be riskier. This is known as the risk factor premium. Therefore VTI is likely to perform better than VOO in the long term and its underlying assets have served better since 1972. 

Like any other asset with high returns, VTI is more volatile than VOO, meaning the returns have more swings up and down. While VTI offers more returns, the risk-adjusted returns are identical. It’s entirely up to you if you’re okay with the higher volatility.


VTI Vs. VOO: Popularity And Fees

While these two funds are very liquid, Vanguard’s VTI is usually more popular and has a market capitalization of more than $910 billion. On the other hand, VOO has assets of around 450 billion. Both funds have an expense ratio of 0.03%.

Both of these funds can be categorized as big. The size of the fund is a good indicator of whether other investors trust it. While a big fund isn’t necessarily an indication of how good the fund is, it is a key consideration when choosing the right fund.

VTI Vs. VOO: Which One Should You Invest In?

If you are an investor seeking a large-cap stock with low volatility, it’s advisable to choose VOO. On the other hand, if you need greater diversification and higher expected returns but with more volatility, you should go with the VTI as it captures the whole United States stock market. 

Alternatively, you may use VOO together with a small capitalization value fund.

In any case, both VTI and VOO are great options for people seeking better exposure to the United States market. Some of the retirement plans employers sponsor may only offer one of these funds and not the other. There are also equivalents in mutual funds, known as VTSAX for VTI and VFIAX for VOO.

To Sum Up – VTI Vs. VOO

Now that you have done your learning regarding these two funds, you need to determine which of these two would suit your current and long-term goals. So long as your budget permits you to invest in one of these funds, take the plunge into your investment journey.

Always remember that the stock market may be risky. But managing the risk through proper due diligence and education will help lessen these risks. It will ultimately help you reach your long-term goal of financial freedom and independence. So, c’mon! Start investing now!

Want to start investing with little money? M1 Finance helps you by investing in fractional shares, which means you can just buy $50 worth of shares without having to meet the $200 it will take to buy an entire share. 

They charge no fees or commissions and are highly trusted by over 500,000 people. Start invest with M1 Finance today!

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VTI vs VOO - Similarities, Differences [All You Need To Know

2 thoughts on “VTI vs. VOO: Similarities, Differences [All You Need To Know]”

  1. Hi Marjolein, many thanks for your overview of these two ETFs. I am using Degiro and I couldn’t find mentioned ETFs there. I am buying IWDA there as it is a good ETF and it is commission-free. Just was wondering if you use Degiro – did you find similar ETFs on Degiro? I check justetf website to understand if the ETFs are available for ppl from the Netherlands, so I didn’t find VTI there – meaning it is not available for Europeans (but VOO in there). It would be great to know your opinion about ETFs that are available for Europeans, as I can find a lot of info about the instruments that are available for Americans, but now for Europeans. Many thanks! 🙂

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