VTI vs. VOO

Are you ready to take your investment portfolio to the next level? Vanguard Total Stock Market ETF (VTI) and Vanguard S&P 500 ETF (VOO) are two top contenders that can help you achieve your financial goals. In this article, we’ll explore the similarities and differences between these two ETFs, helping you make an informed decision for your investment strategy.

What Is VTI?

VTI is an ETF that features a diverse range of large-, mid-, and small-cap stocks across various sectors, with a particular emphasis on technology and consumer discretionary. This ETF tracks the performance of the CRSP U.S. Total Market Index, comprising more than 3,800 individual stocks that are traded on the New York Stock Exchange and Nasdaq.

What Is VOO?

VOO, on the other hand, tracks the performance of large-cap stocks that are part of the S&P 500, a widely watched stock index. With nearly one-third of its 506 stocks in the tech sector, VOO offers investors exposure to some of the biggest players in the market.

VTI vs. VOO: Similarities

Both VTI and VOO are part of the Vanguard family of funds, known for their exceptional quality and performance. But their similarities go beyond that:

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Minimum Investment

Remarkably, both VTI and VOO allow for a minimum investment of just $1. This sets them apart from other Vanguard funds that may impose higher minimum investment requirements.

Exposure to Certain Sectors

With VTI and VOO, you’ll find similar exposure to key sectors of the economy. Both ETFs have a significant stake in the tech sector, with VTI at 30.1% and VOO at 28.1%. They also share exposure to the health care sector and the financial sector.

Top Holdings

As of July 2023, VTI’s top holdings included Apple, Microsoft, and Amazon, while VOO’s top holdings were also Apple, Microsoft, and Amazon. This highlights the prominence of these tech giants in both ETFs’ portfolios.

Expense Ratio

When it comes to expenses, VTI and VOO offer exceptionally low expense ratios of 0.03%. This is well below the industry average for ETFs and mutual funds, making them a cost-effective choice for investors.

Assets Under Management

Both VTI and VOO rank among the world’s largest ETFs in terms of assets under management. VOO holds the third position with $326 billion in total assets, closely followed by VTI with $310 billion.

Management

Both ETFs are passively managed, a common approach among ETFs that allows for a more hands-off approach to investment decisions.

Performance

Based on market price, VTI boasts a 10-year average annual return rate of 12.07%, while VOO’s average annual return rate stands at 12.61%. These figures demonstrate the strong performance of both ETFs over the long term.

VTI vs. VOO: Differences

As much as VTI and VOO share similarities, they also have distinct characteristics that set them apart:

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Age

VTI has been around since 2001, while VOO was launched in 2010. Vanguard itself, the investment giant behind these ETFs, was founded in 1975 and offers a wide range of investment funds.

Share Price

As of August 18, 2023, VOO’s share price stands at $400.92, nearly double the share price of VTI at $216.96.

Dividend Yield

In terms of dividend yield, VTI and VOO offer similar percentages of 1.42% and 1.45%, respectively. Dividend yield represents the annual return on investment in the form of dividends.

Trading Volume

VOO has a higher average trading volume than VTI, with 3,940,585 shares traded daily on average, compared to VTI’s 2,938,132 shares.

Number of Stocks

VTI’s portfolio consists of 3,861 stocks, providing broader exposure to the stock market compared to VOO’s portfolio of 506 stocks.

Exposure to Consumer Discretionary Sector

VTI places more weight on the consumer discretionary sector, with 14.4% of its portfolio dedicated to this sector. In contrast, VOO has only 10.6% of its stocks in the consumer discretionary sector.

Morningstar Rating

VOO has earned a prestigious five-star rating from Morningstar, while VTI holds a three-star rating. Morningstar’s star ratings are based on a fund’s historical performance.

Sustainability Rating

Both VTI and VOO have received a sustainability rating of 3 out of 5 from Morningstar, indicating that they may not be the optimal choice for sustainability-focused investors.

Who Should Buy VTI?

If you’re seeking an ETF with a low expense ratio and an attractive average annual return rate, VTI might be an excellent fit for your portfolio. With an expense ratio of only 0.03% and an average annual return rate of over 12%, VTI offers great value. However, it’s important to consider that VTI’s higher share price, extensive portfolio, and heavy exposure to the tech sector may not be ideal for every investor.

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Pros:

  • Low expense ratio
  • Broad exposure to the stock market
  • Attractive 10-year average annual return rate

Cons:

  • Higher price per share
  • Extensive portfolio of stocks
  • Heavy exposure to the tech sector

Who Should Buy VOO?

VOO is a formidable option for investors seeking a low-cost ETF with impressive performance. With an expense ratio of 0.03% and a 10-year average annual return rate exceeding 12%, VOO offers a compelling investment opportunity. Additionally, tracking the S&P 500 provides investors with exposure to a wide range of large-cap stocks. However, it’s important to note that VOO’s heavier exposure to a few dominant stocks, limited diversification in terms of stock numbers and types, and tech sector dependency should be taken into consideration.

Pros:

  • Low expense ratio
  • Attractive 10-year average annual return rate
  • Outperformed the Morningstar category over various timeframes

Cons:

  • Heavy exposure to a few dominant stocks
  • Reliance on the tech sector
  • Less diversification compared to VTI in terms of stock numbers and types

In conclusion, both VTI and VOO offer compelling features and strong performance records. When deciding between the two, consider your investment goals, risk tolerance, and preferences. By considering these factors, you can make an informed decision that aligns with your financial journey.

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