VTI vs VOO: Which Should You Choose?

We are going to explore the difference between Vanguard Total Stock Market ETF (VTI) 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 be making it easy for you to decide between VTI vs VOO.

 

VTI vs VOO

The primary difference between VTI and VOO is that VTI is comprised of all the stocks in the US while VOO only included the stocks in the S&P 500.

VTI:

  • Tracks the performance of the CRSP US Total Market Index
  • Has an expense ratio of 0.03%
  • No minimum initial investment
  • Holds 3535 stocks

VOO:

  • Tracks the performance of the S&P 500 Index
  • Has an expense ratio of 0.03%
  • No minimum initial investment
  • Holds 508 stocks


VTI vs VOO Performance

VOO and VTI performance is similar but not the same.  They track different indexes meaning the performance will vary.  However, they are very similar in their performance returns over 10 years.

Similarities between VOO and VTI:

  • Vanguard Funds
  • Similar Performance
  • Broad Diversification
  • Low Expense Ratios

Here is how their performance compares over the last 10 years:

As you can see from the chart, they perform almost identically.

 

VOO and VTI Differences

VOO vs VTI primarily differ in that VOO is tracking only the S&P 500.  VTI has a more total United States diversification.  By tracking over 3,000 stocks, VTI provides more diversification compared to VOO and its roughly 500 stocks.

Differences between VOO and VTI:

  • Different Number Of Holdings (~500 vs ~3,500)
  • Level Of Diversification (Large, Medium, Small Cap Stocks)

 

VOO Profile

  • Fund Inception: 2010
  • Expense Ratio: 0.03%
  • Number Of Stocks: 508
  • Top 10 Holdings: 28%

 

Vanguard S&P 500 ETF (VOO) received a big endorsement when Warren Buffett himself recommended it!

The fund, as of April 30th, 2021, has $731.5 billion total net assets.

 

VOO is largely made up of Microsoft, Apple, Alphabet, Amazon, and Facebook and provides exposure to over 500 stocks.

 

No Minimum Investment

VOO and VTI are exchange-traded funds (ETFs) which mean there is NO minimum investment.  Investors looking to buy fractional shares can use platforms like M1 Finance.

Normally, 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.  You no longer have to keep your money sitting idle until you have enough to purchase a full share.  This is especially beneficial when it comes to stocks with high prices like Amazon, Google, and Tesla.

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VOO Historical Returns

Take a look at the historical chart below.  You will see VOO and the S&P 500 closely overlap:

VTI Profile

  • Fund Inception: 2001
  • Expense Ratio: 0.03%
  • Number Of Stocks: 3535
  • Top 10 Holdings: 22.9%

 

Vanguard Total Stock Market ETF (VTI) provides investors with exposure to the entire U.S. equity market.  The U.S equity market includes small, mid, and large-cap growth and value stocks.

VTI was created in 2001 and currently has an expense ratio of only 0.03%.

 

VTI is largely made up of Microsoft, Apple, Amazon, and Google and also offers exposure to over 3500 stocks.

Over the last 10 years, VTI has returned an average of 14.21% per year as of May 31, 2021.

VTI has become one of the most popular index funds because of its strong diversification and ultra-low expense ratio.

 

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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 usually have a lower expense ratio.  In this case, the expense ratio is the same and both VTI and VOO are ETFs.

Their equivalent admiral funds are:

VTI = Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)

VOO = Vanguard 500 Index Fund Admiral Shares (VFIAX)

ETFs are also available to trade at anytime the market is open.  Index funds are bought 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.  It can encourage bad habits like market timing and frequent trading.  If you have these tendencies, then an index fund might be a better option for you.

Lastly, if you prefer to have every penny invested then you will like that Index funds offer fractional share buying on the Vanguard platform.  On the contrary, ETFs have to be bought one full share at a time unless you are using a platform like M1 Finance.  That can sometimes lead to money left uninvested while you wait for your next contribution.  This is more of a preference since I don’t think it will make a significant difference in your returns.

 

Which is Better VTI or VOO?

VTI and VOO are very similar investments.  VTI offers more diversification since it holds about 7 times more stocks.  However, this hasn’t made a difference in their performance since they have both had virtually the same returns over the last 10 years.

For those reasons, I would say both are a great option for long-term investors.  If having a larger basket of stocks helps you sleep at night, then VTI would be a better option.

 

Is VTI or VOO Better for Financial Independence?

Both VTI or 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 a great investment for financial independence.  I own both.

After keeping fees to a minimum, you can increase your savings rate and Prioritize Your Investments.

Then, you will be well on your way to Financial Independence and Early Retirement!

 

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Disclaimer
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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.