Investors who want to quickly, cheaply, and efficiently own a large number of U.S. stocks have a plethora of options. And many investors with the same goals end up making their way to a pair of Vanguard’s most popular funds: the Vanguard Total Stock Market ETF (VTI) and the Vanguard S&P 500 ETF (VOO).
VTI and VOO are exchange-traded funds (ETFs) that invest in large swaths of American stocks. The former invests across stocks of all sizes, while the latter holds a collection of some of the largest companies on the U.S. stock market.
Why are they so popular?
These ETFs are index funds, which means rather than a human at the helm, all investment decisions are made based upon a rules-based index. Each ETF simply tracks an index, and that index determines what stocks the fund buys and sells. This form of management, while simple, can produce better returns than what human managers can muster—and it also leads to lower costs of running the funds, which results in lower expenses for you and me.
These Vanguard index funds also have a number of similarities, which we’ll get to in a minute. In fact, they’re similar enough that you might only want to hold one or the other in your portfolio. That makes their few key differences all the more important in determining which index fund is a better fit for your portfolio.
So read on as I explore this pair of Vanguard ETFs. I’ll discuss what VTI and VOO do, what they hold, how they’ve performed over time, and more. My goal here: Make sure you have all the information you need to make an informed investment in one, the other, or both.
Disclaimer: This article does not constitute individualized investment advice. These funds appear for your consideration and not as investment recommendations. Act at your own discretion.
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What Is VTI?
The Vanguard Total Stock Market ETF (VTI) is, as the name suggests, a “total stock market” fund. In short, it aims to own most or all of the stocks in a country’s stock market—in this case, America’s. To do this, it tracks the performance of the CRSP US Total Market Index, which represents roughly 100% of the investable U.S. stock market. As I write this, that’s nearly 3,900 stocks!
VTI, then, includes stocks of all market capitalizations. Market cap refers to a company’s size as measured by the stock market, calculated by taking all the company’s shares outstanding and multiplying that number times the stock price. Vanguard Total Stock Market owns large- ($10 billion or more), mid- ($2 billion to $10 billion), and small-cap stocks ($300 million to $2 billion).
It’s also a “domestic large blend” fund, which means several things:
- Domestic: It holds U.S.-listed stocks.
- Large: While it holds stocks of all sizes, most of its assets are in larger companies.
- Blend: It holds both value stocks and growth stocks.
This ETF also has a mutual fund counterpart: the Vanguard Total Stock Market Index Fund (VTSAX). VTSAX is a great way to access VTI’s strategy within 401(k) plans, which typically don’t allow you to invest in ETFs.
Related: VTI vs. VTSAX: How Do They Compare?
What Is VOO?
The Vanguard S&P 500 ETF (VOO) invests in the S&P 500, one of the best-known stock market indexes in the world. The S&P 500 tracks the performance of 500 large companies listed on the U.S. stock exchanges, and nowadays, if you ask someone how the market performed on a given day, they’ll tell you how the S&P 500 performed.
While the S&P 500 is made up of large companies, it’s not necessarily the 500 largest companies in the U.S. Instead, the S&P 500 has several criteria for inclusion. Stocks must:
- Have their primary listing on a U.S. exchange, be subject to U.S. securities laws, and derive at least 50% of its revenues in the U.S.
- Be listed on the New York Stock Exchange (including the NYSE Arca or NYSE American) or Nasdaq.
- Have a market cap of $14.5 billion or more
- Trade at least 250,000 shares in each of the six months prior to the evaluation date
- Have an annual dollar value traded to float-adjusted market cap of more than 0.75
Several types of securities are ineligible for inclusion, including master limited partnerships (MLPs), preferred stocks, ETFs, closed-end funds (CEFs), and more.
Importantly, the S&P 500 invests in fewer stocks (roughly 500 to VTI’s 3,900) and is mostly made up of large-cap stocks.
VOO also has a mutual fund counterpart: The Vanguard 500 Index Fund Admiral Shares (VFIAX).
VTI vs. VOO: Vital Stats
VTI vs. VOO: Performance
VOO has outperformed VTI throughout its publicly traded life, though with one exception (since inception), that performance has been fairly close.
The stark difference between these Vanguard ETFs since inception can be chalked up to when each fund was launched—that is, VOO came to life more than nine years later than VTI, and thus missed out on several downturns, most notably, the bear market during the Great Recession.
Still, the S&P 500, upon which the VOO is based, has delivered a higher total return (price plus dividends) since VTI’s inception, so it’s safe to say VOO’s record for outperformance would have held up had both funds launched in 2001.
Just remember: Past performance can be valuable information when evaluating two funds, but it doesn’t guarantee that future performance will follow suit.
VTI vs. VOO: Similarities
The Vanguard Total Stock Market ETF and Vanguard S&P 500 ETF are both Vanguard stock market ETFs that invest in publicly traded companies listed in the U.S. Both are popular investments that have accumulated billions of dollars in assets.
Both are broadly diversified. Both perform fairly similarly—despite the fact that VTI holds many more stocks, VTI and VOO both have a large percentage of their assets invested in the same companies. That’s because both funds are market cap-weighted, which means the larger the company, the more assets the fund invests in its stock.
A fund’s expense ratio is a percentage of your investment that goes toward paying various expenses, such as managers, administration, marketing, and more.
VTI and VOO have the same expense ratio: 0.03%. Or in other words, you would pay just 30 cents annually for every $1,000 you had invested in each fund. (Note: ETF expenses are taken directly out of performance.)
Dividend yield is the percentage of an asset’s share price that it pays out in dividends each year. These funds’ dividend yields are virtually identical, with VTI at 1.51% and VOO at 1.52%. Also, both ETFs pay their dividends on a quarterly basis.
Holdings are the stocks, bonds, or other assets a fund invests in. VTI and VOO have the same top 10 largest holdings: Apple (AAPL), MIcrosoft (MSFT), Alphabet (GOOG/GOOGL), Amazon (AMZN), Nvidia (NVDA), Tesla (TSLA), Meta Platforms (META), Berkshire Hathaway (BRK.B), UnitedHealth Group (UNH), and Exxon Mobil (XOM).
Because both funds are market cap-weighted, they both dedicate the largest slices of their assets to these stocks.
Morningstar evaluates a fund’s risk relative to its Morningstar Category. VTI, for instance, is considered to have above-average risk compared to other Large Blend funds, whereas VOO’s risk is considered just average.
Vanguard evaluates risk on a 1-to-5 scale. It assigns a Risk Level 4 (out of 5) to both VTI and VOO, which means they’re “moderate to aggressive funds.” Thus, these funds at Risk Level 4, which are “moderate to aggressive funds,” and states these funds may be appropriate for long-term investment horizons of ten years or longer. These aren’t investments designed to be day traded.
VTI vs. VOO: Differences
The Vanguard Total Stock Market ETF came to life in May 2001; VOO hit the scene a little later on, in September 2010. The VTI tracks the CRSP US Total Stock Market Index, which includes virtually all stocks on the major U.S. exchanges regardless of size—so it holds large-cap stocks, mid-cap stocks, and small-cap stocks alike. The VOO, however, tracks the S&P 500—an index of 500 predominantly large-cap U.S. companies.
Assets Under Management
VTI has accumulated roughly $310 billion in net assets under management, while VOO has accumulated $325.9 billion.
Turnover (how much of the portfolio has changed hands over the past year) is very low on both, though VOO’s 2.1% is lower than VTI’s 3.4%. This is to be expected: VTI tracks the whole market, so it only needs to add holdings when new stocks join the exchanges, and release holdings when they de-list. VOO, meanwhile, tracks an index that only changes a few constituents every year.
While VTI and VOO offer similar exposure to the market’s 11 sectors, there are slight differences in their sector weightings:
VTI, at nearly 3,900 holdings, has a significantly higher number of stocks in its portfolio than VOO, which has just over 500.
Because it covers the whole stock market, VTI has much more exposure to smaller stocks. VTI currently offers 72% exposure to large caps, 19% exposure to mid-caps, and 9% exposure to small caps. However, while VOO focuses on a large-cap index, it doesn’t hold only large-cap stocks—it has 83% exposure to large companies, but the remaining 17% of assets are invested in mid-cap stocks.
Also, while VTI and VOO have the same top 10 holdings, VTI differs from VOO in how much weight it assigns each stock because it has to spread its overall assets around a larger group of equities:
Every stock in Vanguard S&P 500 is held within Vanguard Total Stock Market. And the stocks held by VOO account for 85% of VTI’s weight—which means the remaining 15% of VTI’s assets are spread across roughly 3,400 other stocks.
Two of the most important Morningstar ratings are its Star Rating and Medalist Rating. The Star Rating is a backward-looking measure that evaluates a fund’s risk-adjusted performance over several time periods and compares it to the fund’s peers. (Morningstar awards 1 to 5 Stars, with 5 being the highest rating.)
I believe the Medalist Rating is a more useful system for people deciding whether to buy a fund. That’s because it’s a more forward-looking rating, where Morningstar evaluates traits including a fund’s parent organization, the managers responsible for making decisions, and fund strategies to determine a fund’s ability to outperform its Morningstar Category index. (Morningstar’s Medalist awards are Negative, Neutral, Bronze, Silver, and Gold.)
VTI earns a Gold Medalist Rating and three Morningstar Stars. VOO also earns a Gold Medalist Rating and five Morningstar Stars.
Which Index Fund Should You Buy?
Vanguard Total Stock Market ETF and Vanguard S&P 500 ETF have two fairly different aims, but because of how they’re built, they’re actually very similar index funds. Both provide heavy exposure to a wide variety of large-cap stocks, and they do so at a very low expense ratio. The biggest difference? VTI offers small-cap exposure, and more mid-cap exposure than VOO.
Because there’s so much overlap—remember: VOO’s holdings account for 85% of VTI’s weight—it would be pretty redundant to hold both index funds.
I look at it this way:
- If you want an ultra-simplified portfolio where you hold one fund to get all of your large-, mid-, and small-cap exposure, Vanguard Total Stock Market ETF is the better of the two funds to hold.
- If you prefer to hold mid- and small-caps at a higher or smaller ratio than what the VTI provides, you’re better off buying Vanguard S&P 500 ETF, then augmenting your portfolio with mid- and small-cap funds.
Either way, you’re getting broad-market exposure at a ludicrously low price. So in my opinion, VTI and VOO both make excellent core holdings for a long-term-oriented portfolio.
VTI vs. VOO: Frequently Asked Questions (FAQs)
Which stock market index fund holds more large-cap stocks?
On a nominal basis, VTI holds a greater number of large-cap stocks than VOO. After all, VTI holds all the large caps within VOO—and it happens to own many more large caps that VOO doesn’t.
However, VOO has a higher percentage of large-cap stocks. VOO is 83% exposed to large caps, while VTI has 72% exposure to large companies.
What are the dividend yields for VTI and VOO?
VTI and VOO have almost exactly the same dividend yield at the moment. VTI yields 1.51%, while VOO yields 1.52%.
What are VOO’s and VTI’s expenses?
VTI and VOO are both extremely cheap index funds, charging just 0.03%, or a mere 30 cents for every $1,000 invested.
Also, by virtue of being ETFs, neither VTI nor VOO have a required minimum investment. You can buy as little as one share (or even part of a share, if your brokerage offers fractional shares). However, both funds have equivalent mutual funds—and if you want to invest in either of those, you’d need to pony up at least $3,000 to start.
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Is VTI market-cap weighted?
Yes, VTI weights its holdings by their market capitalization, as does VOO. This means the larger the stock, the more of the fund’s assets are dedicated to holding the stock.
Editor’s note: Market data from Vanguard, Morningstar, and ETFRC.com, unless otherwise noted.