Exchange-Traded Funds (ETFs) are commonly used investment options and today we are going to compare two very popular ETFs. Today we are going to explore the difference between the VTI vs VOO.
I’ll also share investment tips to help you get started right away and maximize your investments.
VTI vs VOO
The primary difference between Vanguard’s Total Stock Market ETF (VTI) and Vanguard’s S&P 500 ETF (VOO) is the target index fund they desire to track. Vanguard’s Total Stock Market ETF (VTI) aims to track the performance of the CRSP US Total Market Index. This provides investors with exposure to the entire United States equity market. The U.S equity market includes small, mid, and large-cap growth and value stocks.
Vanguard’s S&P 500 ETF (VOO) seeks to track the performance of the S&P 500 Index. This gives investors exposure to 500 of the largest companies in the United States and accounts for about three-quarters of the U.S stock market’s value.
- Fund Inception: 2001
- 10-Year Performance 12.87%
- Aims For Total Market Exposure
- Expense Ratio: 0.03%
- Number Of Stocks: 3551
- Top 10 Holdings: 20.70%
- Yield 1.88%
Vanguard Total Stock Market ETF (VTI) is the equivalent ETF of the Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX).
VTI was created in 2001 and has an extremely low expense ratio of just 0.03%.
These are the top 10 holdings for VTI
VTI is largely made up of Microsoft, Apple, Amazon, and Google but offers exposure to over 3550 more stocks.
Vanguard Total Stock Market ETF (VTI) is one of the most popular ETFs because of this easy diversification.
- Fund Inception: 2010
- 5-Year Performance 9.82%
- Aims To Track The S&P 500
- Expense Ratio: 0.03%
- Number Of Stocks: 508
- Top 10 Holdings: 24.8%
- Yield 1.84%
Vanguard’s S&P 500 ETF (VOO) is the ETF equivalent of Vanguard’s 500 Index Fund Admiral Shares (VFIAX).
VOO received a big endorsement when Warren Buffett himself recommended it.
These are the top 10 holdings for VOO:
As you can see, VOO is largely made up of Microsoft, Apple, Alphabet, Amazon, and Facebook, but also provides exposure to over 500 other stocks.
No Minimum Investment
VOO and VTI are both Exchange-Traded Funds (ETFs), which means they have no minimum investment. This is nice because their equivalent admiral funds have a $3000 minimum investment to get started. So with ETFs, you can get started for the cost of only one full-share.
Normally, fractional shares are not available for ETFs but there are a few options to get around this and maximize your investment money.
Now that we have seen the differences and similarities, we can look into how to use this information to our advantage.
We can take advantage of these two funds right away by:
- Buying Fractional Shares
- Starting With Investor Shares
Buying Fractional Shares
Normally, if you want to invest $100 in an ETF like VTI you would have to wait to purchase a full share which today costs about $150. In this case, you would have to wait until you save another $50 to then purchase one full share.
However, if you can buy fractional shares it would allow you to take full advantage of your investment money. This is because every single dollar is invested in the market and is taking advantage of market gains.
Luckily for us, there is a way to purchase fractional shares of ETFs commission-free. It’s through a platform called M1 Finance.
By using M1 Finance to purchase fractional shares, you don’t have to leave your money sitting in your account earning nothing until you can purchase a full share. You can invest the amount of money you have right away and start taking advantage of market gains.
This is even more beneficial for higher-priced ETFs like VOO which has a current price as of June 2020 of $277.
Starting With Investor Shares
Another option to start investing as soon as possible into VTI or VOO is to start with their investor share funds. Investor share funds have no minimum investment threshold. They also hold the same stocks as their admiral fund and ETF equivalents.
Equivalent Investor Share Funds
VTI = VTSMX
VOO = VFINX
The downside to investor share funds is their management fee is higher, so it’s best to convert to an admiral fund once you pass the $3000 minimum.
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Which is Better VTI vs VOO?
VTI and VOO are both very good investments depending on your investment goals. They are also both Exchange Traded Funds with super-low expense ratios.
However, I would give a slight upper hand to VTI.
VTI has about 7 times more stocks and they are spread out more evenly. This gives VTI more diversification compared to VOO.
Having said that, I believe both VTI and VOO can be a great investment to reach Financial Independence/Retire Early (FIRE). They both have rock bottom expense ratios (0.03%).
Keeping fees to a minimum is important because even small fees can lower your future returns. Now you can work on increasing your savings rate and prioritizing your investments. Then, you will be well on your way to Financial Independence and Early Retirement!
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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.