VOO vs. VTI: Unraveling the Distinctions Between Two Top Vanguard ETFs (2024)

FAQs

VOO vs. VTI: Unraveling the Distinctions Between Two Top Vanguard ETFs? ›

VTI is a total U.S. market fund and holds more than 3,500 stocks. VTI is better diversified and benefits from small and mid-cap stocks that grow into large caps. VOO is less diversified, tracking the performance of the S&P 500 Index. VOO excludes small and mid-cap stocks.

Of the three, only one wins on both cost & diversification and it's the Vanguard Total Stock Market ETF (VTI). A lot of investors today prefer an S&P 500 ETF simply because it's been outperforming over the past couple years.

VTI: Offers broader diversification by including mid-cap and small-cap stocks in addition to large-cap stocks. This can provide exposure to a wider range of sectors and market segments. VOO: Concentrates on large-cap stocks, particularly those in the S&P 500.

Tax Efficiency – Tie

ETFs tend to distribute comparatively fewer capital gains to shareholders – these same gains are simply more challenging to manage efficiently from a mutual fund. Overall, VOO and VTI are considered to have the same level of tax efficiency.

Vanguard High Dividend Yield ETF (VYM)

The better Vanguard ETF for their needs is likely VYM, which delivers a higher 2.9% 30-day SEC yield by targeting the FTSE High Dividend Yield Index. It also charges the same expense ratio as VIG does, at 0.06%.

Or, you could also invest in both, for example, by putting half in VOO and half in VTI. Here's a summary of which one to choose: If you want to own only the biggest and safest stocks, choose VOO. If you want more diversification and exposure to mid-caps and small-caps, choose VTI.

VTI offers a broader scope, encompassing a comprehensive representation of the U.S. market with exposure to large-, mid-, and small-cap equities diversified across growth and value styles. On the other hand, VOO is more concentrated, focusing solely on large-cap stocks from the S&P 500.

VTI - Performance Comparison. In the year-to-date period, VOO achieves a 12.19% return, which is significantly higher than VTI's 11.30% return. Both investments have delivered pretty close results over the past 10 years, with VOO having a 12.92% annualized return and VTI not far behind at 12.31%.

The primary difference between SPY, VOO, IVV, and SPLG is their cost. SPLG has the lowest cost at 0.02%, followed by VOO and IVV at 0.03%, and SPY at 0.09%. If you are a cost-conscious investor, the VOO, IVV, and SPLG might make a more attractive option compared to SPY with their lower expense ratios.

Vanguard Total Stock Market ETF VTI offers cost-efficient, well-diversified exposure to the entire US stock market—a recipe for success over the long run. The fund tracks the CRSP US Total Market Index, which represents approximately 100% of the investable US opportunity set.

What is the 10 year return on VOO vs VTI? ›

In the past year, VOO returned a total of 30.85%, which is slightly higher than VTI's 30.18% return. Over the past 10 years, VOO has had annualized average returns of 12.78% , compared to 12.16% for VTI. These numbers are adjusted for stock splits and include dividends.

The table below shows the total annual returns between VTI and SPY. The table above shows that SPY outperformed VTI in 8 out of 10 years from 2014 to 2023. On average, SPY outperformed VTI by an average of 1.01%. VTI only outperformed in 2 years, from 2014 to 2023, by an average of 1.75%.

That means the tax hit from winning stock bets is postponed until the investor sells the ETF, a perk holders of mutual funds, hedge funds and individual brokerage accounts don't typically enjoy. The ETF tax loophole works only on capital gains, though.

Best Vanguard Funds for Aggressive Investors: Vanguard Explorer (VEXPX) Click to Enlarge If you want to turn up the growth potential and you want to go all-the-way aggressive, look no further than Vanguard Explorer (MUTF:VEXPX).

You can't go wrong with either the Vanguard Total Stock Market ETF or the Vanguard S&P 500 ETF. Both offer very low expense ratios and turnover rates, and the difference in their tracking errors is negligible. The overlap in their holdings ensures that you'll get very similar returns going forward.

VTI and VOO offer almost the same dividend yields—1.42% and 1.45% respectively as of July 31, 2023. Expressed as a percentage, dividend yield tells an investor how much they will earn in dividends each year for every $1 they invest in an ETF.