VOO vs VTI: What’s the Difference?

Investing in Exchange-Traded Funds (ETFs) has become increasingly popular among both novice and seasoned investors. Two prominent ETFs in the market are the Vanguard S&P 500 ETF (VOO) and the Vanguard Total Stock Market ETF (VTI). While both offer exposure to the U.S. stock market, they differ in their underlying assets and investment strategies. In this blog post, we will compare VOO vs VTI to help you better understand their similarities, differences, and which one might be the right fit for your investment objectives.

VOO: Capturing the S&P 500

The Vanguard S&P 500 ETF (VOO) aims to track the performance of the S&P 500 Index, one of the most widely followed equity benchmarks. The S&P 500 represents the largest 500 publicly traded companies in the United States, covering a diverse range of industries. As a result, VOO provides investors with exposure to blue-chip companies across various sectors, including technology, healthcare, finance, and consumer goods.

VTI: Embracing Total Market Diversity

The Vanguard Total Stock Market ETF (VTI) takes a broader approach by seeking to replicate the performance of the CRSP US Total Market Index. This index includes not only the large-cap companies present in the S&P 500 but also incorporates mid-cap and small-cap stocks. Consequently, VTI offers investors exposure to a wider spectrum of U.S. stocks, making it a comprehensive representation of the entire domestic equity market.

Key Differences:

1. Market Coverage: VOO focuses solely on the S&P 500, which comprises large-cap stocks. On the other hand, VTI encompasses a much larger market segment, including not only large-cap stocks but also mid-cap and small-cap stocks. This broader market exposure potentially provides greater diversification.
2. Sector Composition: Given that VOO tracks the S&P 500, its sector allocation mirrors that of the index. The S&P 500 is often weighted toward the technology sector, followed by healthcare, finance, and consumer goods. In contrast, VTI’s sector allocation is influenced by the wider market universe, offering investors exposure to a more diverse range of industries and potentially reducing concentration risk.
3. Performance and Risk: Since VOO focuses solely on large-cap stocks, its performance is closely tied to the performance of the S&P 500 Index. On the other hand, VTI’s performance can be influenced by movements in small-cap and mid-cap stocks in addition to the large-cap stocks. This diversification may result in VTI exhibiting different risk and return characteristics compared to VOO.

Comparing VOO vs VTI

	Yield %	MER %	P/E
VOO	1.57%	0.03%	21.50
VTI	1.56%	0.03%	20.20

VOO and VTI have virtually the same dividend yield & management expense ratio (MER). While the portfolio price to earnings ratio is slightly lower for the VTI. If we compare sector weightings, we find that industrials are a little bigger in the VTI. Whereas financials are a bit bigger within the VOO.

VOO vs VTI: Which one is right for you?

Choosing between VOO and VTI ultimately depends on your investment objectives, risk tolerance, and desired market exposure. If you seek exposure to the largest U.S. companies and prefer a narrower focus on the large-cap segment, VOO may be a suitable choice. However, if you value broader market coverage, increased diversification, and exposure to mid-cap and small-cap stocks, VTI might be more aligned with your investment strategy.

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