VOO vs VOOV: Which ETF Is Best Long Term?

We Compare VOO vs VOOV:

Vanguard S&P 500 ETF (VOO) vs Vanguard S&P 500 Value ETF (VOOV)

These two Vanguard Exchange Traded Funds (ETFs) are very popular. This article will help you decide between VOO and VOOV.

 

VOO vs VOOV

The main difference between VOO and VOOV is the index the ETF tracks. VOO tracks the S&P 500 Index, while VOOV tracks the value section of the S&P 500 Index.

VOOV holds more value stocks from the S&P 500. As a direct opposite, Vanguard’s VOOG includes more growth stocks from the S&P 500.

By investing in VOOG or VOOV, you are making a bet on either growth or value. Growth has outperformed over the last 10 years. However, value stocks usually outperform over the long term.

VOO provides a nice balance of growth and value. This way, you don’t have to guess which will be better in the future.

Another significant difference is the expense ratio. VOO has an expense ratio of 0.03%. VOOV has an expense ratio of 0.1%. That is more than triple the cost!

VOO

• Tracks The S&P 500 Index
• Expense Ratio: 0.03%
• Holds 508 stocks
• Dividend Yield 1.21%
• VOO Institutional Fund Equivalent (VIIX)

VOOV

• Tracks The S&P Value Index
• Expense Ratio: 0.10%
• Holds 447 stocks
• Dividend Yield 2.08%
• Similar To (VTV)

 

VOO vs VOOV Performance

VOO and VOOV have performed similarly over the last 10 years, with VOO beating VOOV by 2.35% annually. This is likely due to VOOV’s increased focus on value compared to VOO.

Both VOO and VOOV have a history of solid returns. For example, over the last 3 years, both have had over 10% returns!

Performance Comparison:

Here is another comparison:

As you can see from the chart, VOO has outperformed VOOV.

Similarities between VOO and VOOV:

• Exchange-Traded Funds (ETFs)
• Similar Performance Over The Long-Term
• Low Expense Ratios
• Vanguard Funds

 

VOO and VOOV Differences

VOO vs VOOV primarily differs in that VOOV tracks the S&P 500 Value Index while VOO tracks the S&P 500 Index. VOOV is also more than 3 times as expensive as VOO (0.10% vs 0.03%).

VOO tracks the S&P 500 Index

VOOV tracks the S&P 500 Value Index

Lastly, VOO has more holdings compared to VOOV. This makes sense because VOOV is comprised of only the value stocks that are in the S&P 500. It leaves out most of the growth stocks.

Differences between VOO and VOOV:

• Different Number Of Holdings (~508 vs ~447)
• Expense Ratio (0.03% vs 0.10%)
• Index They Track (S&P 500 vs Value)

 

VOO vs VOOV Holdings

VOOV is 16% healthcare, while VOO is 14%. VOO is a broad-based fund diversified in several sectors of the market. VOOV is heavily weighted in the healthcare and financial industry.

Here they are side by side:

The top 10 holdings for VOOV make up 18% of its portfolio, while VOO’s top 10 holdings make up 28%.

This means the performance of a few stocks like Apple, Microsoft, and Amazon will significantly impact the overall performance of VOO.

 

VOO and VOOV Holdings Overlap

There is an overlap between VOO and VOOV that includes 446 stocks.  Roughly 88% of VOO’s holdings are in VOOV, and 99% of VOOV’s holdings are in VOO.

Here are VOO and VOOV holdings overlap:

There is an overlap by weight of about 63%:

VOO has more diversification compared to VOOV.

 

VOO Profile

• Fund Inception: 2010
• Expense Ratio: 0.03%
• Number Of Stocks: 508
• 10-Year Performance 16.41%
• Top 10 Holdings: 31%
• Admiral Fund (VFIAX)

Vanguard S&P 500 ETF (VOO) is a very popular ETF that tracks the S&P 500 index. VOO has over $829.0 billion in fund total net assets.

The fund invests in technology, healthcare, financials, industrials, and other industries and has a very low expense ratio.

 

VOO Performance

Vanguard’s VOO seeks to mimic the performance returns of the S&P 500 index. Therefore, the S&P 500 and VOO should always have overlapping performance returns.

 

VOO Top 10 Holdings

Vanguard’s VOO is primarily made up of Apple, Microsoft, Alphabet, Amazon, and Tesla but also provides exposure to over 500 other stocks.

 

VOOV Profile

• Fund Inception: 2010
• Expense Ratio: 0.10%
• Number Of Stocks: 447
• 10-Year Performance 11.35%
• Top 10 Holdings: 18%
• Similar to VUG

Vanguard S&P 500 Value ETF (VOOV) is an ETF focused on value companies. The price-to-earnings (P/E) ratio for VOOV is 16.8x which is low.

That is expected with a value index. The fund has $3 billion in total net assets.

VOOV was created in 2010 and has an expense ratio of 0.10%. This is over three times more than VOO, which has an expense ratio of 0.03%.

Here is what a 0.07% fee (difference between VOOV and VOO) will cost over 30 years.

Assuming you start with an initial investment of $100,000 and contribute $10,000 yearly over 30 years. You will have roughly ~$57,000 less in your account.

This does not include costs to buy and sell your shares.

 

VOOV Performance

Vanguard’s VOOV has underperformed the S&P 500 over the last 10 years:

 

VOOV Top 10 Holdings

Vanguard VOOV’s top 10 holdings include Berkshire Hathaway, Johnson & Johnson, Exxon Mobil, P&G, and Chevron. The ETF also provides exposure to over 400 stocks.

The top 10 holdings make up over 18% of the portfolio. This is good and compares to other ETFs such as Vanguard Total Stock Market Index Fund ETF (VTI).

You can expect less volatility with VOOV since its top 10 holdings make up a smaller number of its holdings (18%). This means that the risk is spread out between many stocks.

 

How To Invest In VOO and VOOV

There are two easy ways to invest in VOO or VOOV commission-free.

1. Vanguard
2. M1 Finance (Use this link for $50 when you open a new account)

Both of these options are free. This is important because, as we saw in our earlier example, fees can lower your portfolio returns.

M1 Finance is the best option because it allows you to purchase VOO, VOOV, and thousands of other stocks.

M1 Finance also lets you purchase fractional shares. This is great for VOO and VOOV due to their high prices per share.

I also use Personal Capital to track my investment fees. They have a free Retirement Fee Analyzer that tells you the future impact of fees on your portfolio.

Personal Capital’s free tools allow you to quickly find which of your investments has high fees so you can switch them to low-cost options. (Get a $20 Amazon Gift Card with this link when you add at least one investment account containing a balance of more than $1,000 within 30 days)

 

Index Funds vs Exchange Traded Funds (ETFs)

Exchange-traded funds (ETFs) are usually a more accessible option for new investors since they don’t have a minimum investment.

In comparison, if you can afford to invest more than the minimum, it’s usually better to choose Vanguard admiral index funds because they typically have a lower expense ratio.

In this case, the expense ratio is the same or better with the ETF version of VOOV and VOO.

Their matching admiral funds are:

VOOV = Vanguard Value Index Fund Admiral Shares (VVIAX)

VOO = Vanguard 500 Index Fund Admiral Shares (VFIAX)

ETFs are also available to trade at anytime the market is open.  Index funds trade after the market closes and the price settles.

Depending on your views, this can be a good or bad thing.

For long-term investors, the ability to trade anytime in the day is not a benefit.  On the contrary, it can encourage bad habits like market timing and frequent trading.

An index fund might be a better option if you have these tendencies.

If you prefer to have every penny invested, you will like that index funds offer fractional share buying on the Vanguard platform.

On the contrary, ETFs must be bought one total share at a time unless you use a platform like M1 Finance.

That can sometimes lead to money left uninvested while waiting for your next contribution.

This is more of a preference since I don’t think it will significantly affect your returns.

 

Which Is Better VOO or VOOV?

Both VOO and VOOV are great long-term investments. VOO offers a similar asset allocation and increased diversification at a much lower cost of only 0.03%.

As we saw earlier, VOO beat VOOV by 2% annually. If those returns continue for the next 10 years, VOO will win.

However, we can’t be sure VOO will continue outperforming VOOV since past performance does not predict future returns. Nevertheless, VOOV may beat VOO over the next 10 years, even with a higher expense ratio.

However, as mentioned, no one can say which ETF will perform better over the long term.

For those reasons, I would say VOO is the better option. It gives you similar returns at a guaranteed lower cost.

I also like that VOO is less volatile compared to VOOV.

A fund to consider as an alternative to VOOV is the Vanguard Value ETF (VTV). VTV has a similar profile and returns but a lower expense ratio (0.04%).

Related Posts:

• VUG vs VOOG
• VTV vs VOO

 

Is VOOV a Good ETF?

VOOV is a good ETF in tax-advantaged accounts to minimize tax on dividends.  This is because of its larger dividend yield of 2.08%.

Investments with high dividend yields in taxable accounts can create a tax drag on your portfolio.

This can lower your total returns over your investing lifetime.

Generally, it is better to put the following:

High Dividend ETFs Like VOOV In Retirement Accounts (Tax Sheltered Accounts)

Low Dividend ETFs In Taxable Accounts

Doing this can help you pay fewer taxes over time.

 

Is VOO or VOOV Better For Financial Independence?

VOO and VOOV can help you reach Financial Independence and Retire Early (FIRE). They both have similar returns on investment. They also have performed great over the last 10 years.

I prefer VOO because I’m a big fan of keeping fees to a minimum. It doesn’t get much better than VOO, with a tiny expense ratio of 0.03%.

I would also suggest looking into other funds that give you more diversification, like VTSAX.

Calculate Your FI Number With My Free FIRE Calculator

 

My Winner: VOO

My winner is VOO based on its lower expense ratio of 0.03%. I always lean towards the lower-cost option when it comes to my investments.

Whether you choose VOO or VOOV, the important part is investing regularly in low-cost funds over the long term. That is the formula for wealth!

If you like ETF comparisons like these, check out more in our related posts below.