When it comes to investing in exchange-traded funds (ETFs), investors have a plethora of options, including those that mirror broad U.S. stock market indexes like the S&P 500 Index. Two popular choices from Vanguard, the VOO (Vanguard S&P 500 ETF) and the VTI (Vanguard Total Stock Market ETF), offer distinct approaches to capturing the U.S. stock market’s growth. Let’s break down the key differences between these two widely-followed ETFs.
The VOO ETF tracks the S&P 500 Index, consisting of approximately 500 of the largest U.S. publicly traded companies. It currently features a significant weighting in the ‘Magnificent Seven’ tech giants. On the other hand, the VTI ETF tracks the CRSP U.S. Total Market Index, encompassing a broader selection of 3,674 stocks at the time of writing. This makes VTI a more diversified option as it includes companies outside the S&P 500.
Both ETFs employ market capitalization weighting, meaning larger companies have a greater influence on the fund’s performance. The top 10 holdings are similar across both VOO and VTI, but the weightings differ due to VTI’s larger number of holdings. VOO has a more concentrated top 10, while VTI distributes weightings more evenly across its broader portfolio.
Sector-wise, the VOO ETF is heavily weighted towards Information Technology (32.5%), followed by Financials (12.4%) and Health Care (11.7%). In contrast, VTI has the largest weighting in Technology (35.2%), followed by Consumer Discretionary (13.8%) and Industrials (12.1%).
Both VOO and VTI boast an impressive expense ratio of just 0.03%, making them highly cost-effective investment vehicles. This is significantly cheaper than the 0.09% expense ratio of SPY (SPDR S&P 500 ETF Trust), another popular ETF that tracks the S&P 500 Index.
In terms of performance, both ETFs have delivered solid returns over various timeframes. However, VOO has slightly outperformed SPY, likely due to its rebalancing timing and asset weighting. VOO has also outperformed VTI, reflecting the strong performance of large-cap stocks in recent years.
Here’s a look at the current performances of VOO, VTI, and SPY:
| ETF | Year-to-Date Return | 1-Year Return | 5-Year Return | 10-Year Return |
|—|—|—|—|—|
| VOO | +12.2% | +19.7% | +85.2% | +173.1% |
| VTI | +11.0% | +18.2% | +79.2% | +155.0% |
| SPY | +12.2% | +19.6% | +85.1% | +167.7% |
Ultimately, the choice between VOO and VTI boils down to an investor’s preference for large-cap stock exposure versus broader market diversification. VOO provides a focused investment in the S&P 500, while VTI offers a more comprehensive representation of the U.S. stock market.
