We are going to explore the difference between VT vs VOO:
Vanguard Total World Stock ETF (VT) vs Vanguard S&P 500 ETF (VOO)
When it comes to investing, there is no shortage of fund options.
Choosing between two funds can be difficult, but I will make it easy to decide between VT vs VOO.
VT vs VOO
The primary difference between VT and VOO is their asset allocation. VT has 40% of its assets in international holdings, while VOO has 100% in domestic holdings.
VT also tracks the FTSE Global All Cap Index, while VOO tracks the S&P 500 Index.
Another significant difference is the number of stocks in each ETF. For example, VOO has 508 different companies in the index compared to 9299 with VT.
VT and VOO have different expense ratios.
VT has an expense ratio of 0.07%
VOO has an expense ratio of 0.03%
This expense ratio means VT is more than twice as expensive as VOO. That can make a significant difference over the long term.
- Tracks the FTSE Global All Cap Index
- Expense Ratio 0.07%
- No Minimum Investment
- Holds 9299 Stocks
- Dividend Yield 2.13%
- Tracks the S&P 500 Index
- Expense Ratio 0.03%
- Holds 508 Stocks
- Equivalent Admiral Fund (VFIAX)
- Dividend Yield 1.35%
VT vs VOO Performance
VT and VOO have had different performance returns over the last 10 years, with VOO beating VT by 4.47% annually. That is a significant difference, especially when considering compound interest on those returns.
Here is how VT and VOO performance compares:
This is a performance chart comparing VT and the S&P 500 of the last 10 years:
As you can see, VOO and the S&P 500 have outperformed VT over the years.
However, this doesn’t necessarily mean this trend will continue.
Similarities between VT and VOO:
- Vanguard Funds
- Exchange-Traded Funds (ETFs)
- Low Expense Ratios
- Well Diversified
VT and VOO Differences
The main difference between VT and VOO is that VT tracks the S&P 500 index, while VT tracks the FTSE Global All Cap Index. In addition, VOO holds 500 large U.S companies while VT holds companies worldwide, including the U.S.
VT is a World Stock ETF
VOO is a Large Blend ETF
Therefore, VOO has fewer holdings compared to VT.
By investing in an ETF with more holdings, you are helping diversify your portfolio and minimize risk.
Differences between VT and VOO:
- Asset Allocation (International vs the U.S)
- Different Number Of Holdings (~9299 vs ~508)
- Expense Ratio (0.07% vs 0.03%)
- Level Of Diversification
VT vs VOO Holdings
Vanguard’s VOO has fewer holdings than VT (508 vs 9299). However, VT and VOO have almost the same top 10 holdings.
The difference is VT’s top 10 holdings make up 15% of its total holdings compared to 30% with VOO.
This difference makes VT more diversified compared to VOO.
VOO will also have more volatility depending on the performance of these 10 holdings.
Here is VOO and VT’s top 10 holdings side by side:
VT and VOO’s top 10 holdings primarily hold Apple, Microsoft, Amazon, Google, and Tesla.
VOO and VT Holdings Overlap
There is an overlap between VOO and VT that includes 506 stocks. Roughly 99% of VOO’s holdings are in VT, and 5% of VT’s holdings are in VOO.
Here are VOO and VT holdings overlap:
There is overlap by weight of about 50%:
VT has more diversification compared to VOO.
- Fund Inception: 2008
- Expense Ratio: 0.07%
- Number Of Stocks: 9299
- Top 10 Holdings: 15%
The Vanguard Total World Stock ETF (VT) exposes investors to developed and emerging equity markets.
The ETF holds companies in North America, Emerging Markets, and Europe.
VT launched in 2008 and currently has an expense ratio of 0.07%. This expense ratio makes it a low-cost ETF to own, but not as low as VOO (0.03% expense ratio).
The cost of owning VT over VOO won’t make a significant difference since they are both low-cost ETFs.
More importantly, is being able to achieve the asset allocation you desire. (international vs domestic).
VT’s equal Admiral Fund is the Vanguard Total World Stock Index Fund Admiral Shares (VTWAX).
Vanguard’s VT aims to track the FTSE Global All Cap Index, covering international and domestic equities. VT has the potential for high growth but comes with risks from emerging markets.
Here is VT’s performance chart:
As you can see, VT has had strong growth over the last 10 years.
VT Top 10 Holdings
Moving on, here are the top 10 holdings for VT:
VT is primarily made up of Apple, Microsoft, Google, Amazon, and Tesla.
Over the last 10 years, VT has underperformed the S&P 500 with an average return of 10% per year compared to 16.5% from the S&P 500.
VT has about $32 billion in net assets.
It has underperformed over the last 10 years, but again there is no guarantee the next 10 years look the same.
No Minimum Investment
VOO and VT are exchange-traded funds (ETFs), so there is no minimum investment. Investors looking to buy fractional shares can use platforms like M1 Finance.
Usually, fractional shares are not available for ETFs, but with M1 Finance, you can purchase fractional shares with no commission.
Buying fractional shares allows you to maximize your investment. This is great for shares of VOO due to its high price per share.
There are two easy ways to invest in VOO or VT commission-free.
Both of these options are free. This is important because fees can lower our returns.
I like M1 Finance as the best option because it gives you the flexibility to purchase VOO, VT, and thousands of other stocks.
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 easily find which of your investments has high fees so that 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)
- Fund Inception: 2010
- Expense Ratio: 0.03%
- Number Of Stocks: 508
- Top 10 Holdings: 30%
- Dividend Yield: 1.35%
- Equivalent Admiral Fund (VFIAX)
Vanguard S&P 500 ETF (VOO) is a very popular ETF that tracks the S&P 500 index. VOO has over $816 billion in fund total net assets.
The fund invests in technology, healthcare, financials, industrials, and other industries and has a low expense ratio.
Vanguard’s VOO ETF has been labeled by Seeking Alpha as one of the best investments for beginners because of its low cost, built-in diversification, and excellent performance.
Vanguard’s VOO aims to have the same performance returns as the S&P 500 index. Therefore, VOO and the S&P 500 should always overlap.
Here is VOO and the S&P 500 Index performance chart:
VOO (Blue) S&P 500 (Yellow)
As you can see, VOO and the S&P 500 overlap in performance.
This should be an expectation in the future.
VOO Top 10 Holdings
Vanguard’s VOO is primarily made up of Apple, Microsoft, Alphabet, Amazon, and Tesla and provides exposure to over 500 other stocks.
Which is Better VT or VOO?
VT and VOO are different investments. VT offers more diversification and less volatility since it holds about 18 times as many stocks as VOO. This diversification has resulted in a lower performance over the last 10 years.
Even so, I would say both are excellent options for long-term investors.
VT is a great option if you want an asset allocation that includes international stocks.
If you are comfortable with 500 large U.S based companies, VOO allows you to invest in them at a low cost.
I think both VT and VOO can have a place in a long-term investors portfolio.
Lastly, it’s important to consider costs and fees because they can add up in the long run.
That’s why it’s so important to purchase and sell your shares commission-free.
You can purchase fractional shares for free with M1 Finance, and they give you the ability to buy VOO, VT, and thousands of other stocks/ETFs.
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 a better option 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 VT and VOO.
Their matching admiral funds are:
VT = Vanguard Total World Stock Index Fund Admiral Shares (VTWAX)
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.
If you have these tendencies, an index fund might be a better option.
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 have to be bought one total share at a time unless you are using 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 make a significant difference in your returns.
Is VT or VOO Better for Financial Independence?
Both VT and VOO can get you to Financial Independence Retire Early (FIRE). They both have a similar return on investment and have rock bottom expense ratios.
So, either option is an excellent investment for financial independence.
My Winner: VT
My winner is VT, based on it having a more diversified portfolio with over 9,000 holdings.
As I mentioned, you can invest in both depending on your desired asset allocation.
Both ETFs are Vanguard funds which likely means they will continue to offer low-cost ETFs.
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This information is my opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.