VTI Versus VOO: How To Compare These Vanguard ETFs (2024)

Vanguard offers two exchange-traded funds that can easily stand in as core holdings for novice and experienced investors alike. The Vanguard Total Stock Market Index Fund (VTI) and the Vanguard S&P 500 ETF (VOO) separately provide low-cost exposure to the best stocks in the U.S. Despite that similarity, the two funds don't share the same investment thesis—which may mean one is a better fit for your wealth goals.

Let's do an in-depth comparison between these top Vanguard ETFs, so you can decide which belongs in your investment portfolio.

Overview of Vanguard ETFs

Vanguard ETFs are popular, low-cost funds that focus on in-demand assets. Vanguard's fund catalog includes options for broad to specific exposures across various segments of the equity and bond markets.

Many Vanguard ETFs, including VTI and VOO, are index funds. Index funds do not have an active trading strategy, but instead mimic a designated financial market index. This style of fund is popular because it delivers market-level performance with low expense ratios. iShares ETFs follow a similar model. A low expense ratio allows more of the underlying asset returns to flow through to fund shareholders.

Understanding VTI

With that context, let's kick off our VTI versus VOO comparison with a detailed review of VTI's investment approach, key features and composition.

What Is The Vanguard Total Stock Market Index Fund (VTI) ETF?

VTI tracks the CRSP US Total Market Index, which represents the entire U.S. public equity market. The index weights its constituents by market capitalization, which is calculated by multiplying each stock's price by the number of available shares. The market-cap weighting strategy gives higher allocations to larger companies.

VTI has more than 3,600 different stocks, including micro caps, mega caps and everything in between. The portfolio also covers all economic sectors as well as growth and value assets.

Key Features And Composition

Key features of VTI include:

• Broad diversification: VTI is well diversified, with more than 3,600 stocks representing all aspects of the U.S. equity market. This diversification insulates shareholders from downturns affecting one segment or one style of equities.
• Low expense ratio: VTI's expense ratio is 0.03%. This is below the average expense ratio for equity ETFs, which was 0.16% in 2021. According to Vanguard, the average expense ratio for funds similar to VTI is 0.78%.
• Sampling strategy: Index funds can mimic their underlying index by sampling or full replication. VTI takes the sampling approach, meaning it does not replicate the index portfolio exactly but still seeks the same performance as the index. Fund managers often choose sampling to keep expenses lower.
• Dividend yield: VTI's 30-day SEC yield is 1.27%. The 30-day SEC yield is a standardized yield calculation that allows for more reliable comparison of fund yields.

Understanding VOO

VOO is also a low-cost index fund. VOO invests in the 500 largest U.S. public companies. Like VTI, VOO is often used as a core holding—meaning investors will allocate a large percentage of their overall portfolio to this fund.

Let's review the strategy and key features that make VOO so popular.

What Is The Vanguard S&P 500 (VOO) ETF?

VOO invests in the stocks of the . These are the largest, most successful companies on the U.S. stock exchanges. Both the fund and index hold 503 total stocks, because three S&P 500 companies have two share classes. Those three companies are Alphabet (GOOG) (GOOGL), Fox (FOX) (FOXA) and News Corp (NWS) (NWSA).

VOO focuses on large-caps. This fund is also market-cap weighted, so the biggest companies in the fund have the largest allocations. Microsoft (MSFT) and Nvidia (NVDA)—both $3 trillion companies—collectively comprised nearly 14% of the fund as of June 30. By comparison, the $8 billion media company Paramount Global (PARA) makes up just 0.01% of the VOO's portfolio.

Note that VOO is not the only S&P 500 ETF out there. SPY by SSGA is another popular choice. For more information, see our SPY versus VOO comparison.

Key Features And Composition

Key features of VOO include:

• Moderate diversification: The VOO portfolio includes 500 companies that collectively account for about 80% of the market capitalization in the U.S. stock market.
• Low expense ratio: VOO's expense ratio is a tidy 0.03%. Vanguard says the average expense ratio for similar funds is much higher, at 0.78%.
• Full replication strategy: VOO holds every stock within the S&P 500, rather than a representative sample.
• Dividend yield: VOO's SEC 30-day yield is 1.3%.

How To Compare VTI Vs VOO

A comparison of VTI and VOO begins with a side-by-side review of each fund's characteristics, as shown in the table below.

The two funds are similar in size, expense ratio, dividend yield and 10-year average annual returns. They differ in the nature and quantity of their holdings.

Consider Your Investment Objectives

To choose between VTI and VOO, start by revisiting your investment objectives and style. Consider these points:

• Timeline: Both VTI and VOO are long-term plays. You would buy these funds to hold indefinitely, not to make short-term profits.
• Allocation control: VTI's broader coverage of the U.S. stock market is a better fit for hands-off investors who aren't targeting specific exposures of different market areas. VOO has a tighter focus, so it can be combined more easily with other funds to fulfill a specific allocation strategy.
• Market view: Over the last 10 years, VOO has outperformed VTI slightly. This is primarily because VOO holds slightly higher percentages of mega cap stocks, which have driven overall stock market growth in the last decade. If you expect that trend to continue, VOO is your choice. Some experts, including JPMorgan analysts, believe small- and mid-caps will shift into the growth frontrunners soon. You could benefit from that shift with minimal added risk by holding VTI instead of VOO.

Understand Holdings

The portfolios of VTI and VOO have roughly 80% overlap. Both hold the entire S&P 500, but VTI additionally has exposure to the rest of the U.S. stock market. VTI's broader portfolio makes sense if you would like exposure to smaller companies without having to add another fund to get it.

Review Expense Ratios

VTI and VOO have the same low expense ratio of 0.03%. Expense ratios are an important factor, particularly for funds you intend to hold long-term. The ratio quantifies the amount you are charged annually for fund expenses, so lower is better.

Analyze Performance Metrics

VTI and VOO have similar performance metrics. VOO has outperformed VTI slightly over the last 10 years, but the gap has widened recently. As noted, the outperformance comes from VOO's larger positions in mega cap tech stocks.

In truth, both VTI and VOO live and die by the performance of the mega caps. This is due to the market-cap weighting strategy used in both funds, which gives the highest allocations to the biggest companies. VTI has more holdings and, therefore, slightly lower allocations of those mega cap stocks versus VOO. This has worked against VTI's performance in recent years, but that trend probably won't continue indefinitely.

Compare Dividend Figures

VTI and VOO have the same dividend yield of 1.3%. Over the last year, VTI's quarterly distributions have ranged from $0.79 per share to $1 per share. VOO's quarterly payments have ranged from $1.49 to $1.80.

Weigh Growth Potential

Both VTI and VOO have long-term growth potential. VOO will outperform if Microsoft, Nvidia, Apple and the other top S&P 500 stocks continue strong.

There is a concern that these stocks will become overvalued and pull back. Still, if a tech sell-off happens, it won't be permanent. That means your investment timeline determines how much you would be affected. If you plan to hold either fund for the long-term, the performance difference between them will likely be small.

Evaluate Impact Of Market Conditions And Investment Strategies

The market climate, whether positive or negative, will affect both VTI and VOO. If there is a broad downturn, you can expect both funds to lose value in line with the overall market.

You can limit your portfolio volatility by holding cash and fixed income assets alongside your VTI or VOO position. You might hold 10% to 40% of your invested capital in Treasury funds, for example. A lower percentage is appropriate for risk-tolerant investors with a long timeline. Risk-averse investors who are nearing retirement may prefer higher weightings of those less volatile assets.

Note that you will need to rebalance occasionally to maintain your targeted weightings. In time, your stock funds will gain value and increase your equity exposure. If you don't rebalance, your allocation gradually gets riskier over time.

Should You Buy VTI Or VOO?

Now we can distill the details into the answer you need: Should you buy VTI or VOO?

Those Who Should Consider VTI

VTI is best suited for investors seeking broad domestic equity exposure from one low-cost fund. Ideally, VTI investors also have the timeline and fortitude to ride out any market downturns. They may additionally believe that big tech's strong run may be nearing an end.

Those Who Should Consider VOO

VOO is an appropriate pick for investors who only want to buy the biggest companies in the U.S. They can accept the potential volatility that comes with investing in big tech. They may choose to surround their VOO holdings with more specific exposures or keep things simple by pairing VOO with a diversified Treasurys fund.

Disclosure: I currently own VOO alongside some fixed-income funds and mid cap funds, including Vanguard's Mid-Cap ETF (VO).

Bottom Line

VTI and VOO are both good picks for the long-term investor in need of a core U.S. equity fund. The main difference between the two is VTI's small and mid-cap holdings. If that exposure is appealing, VTI is your choice. Otherwise, go with VOO.

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