VTI vs VUG: Which Vanguard ETF Should You Choose?

We Compare VTI vs VUG: Vanguard Total Stock Market ETF (VTI) vs Vanguard Growth ETF (VUG)

These are two popular Vanguard Exchange Traded Funds (ETFs).

This article will help you decide between VTI and VUG.

 

VTI vs VUG

The primary difference between VTI and VUG is the number of holdings in the ETF.  VTI holds 3,535 stocks, while VUG has 287 stocks.

VTI holds 3,535 different companies

VUG holds 287 different companies

This makes VTI much more diversified compared to VUG.  The top 10 holdings for VUG make up 50% of the ETF, which is significantly more than VTI (26%).

Another difference between these two vanguard funds is the index they track.

VTI tracks the CRSP Total Market Index

VUG tracks the CRSP US Large Cap Growth Index

Vanguard’s VTI effectively tracks the performance of the entire US stock market.

VTI

• Fund Inception: 2001
• Expense Ratio: 0.03%
• Number Of Stocks: 3,535
• Top 10 Holdings: 26%
• Dividend Yield: 1.1%
• Equivalent Admiral Fund (VTSAX)

VUG

• Fund Inception: 2004
• Expense Ratio: 0.04%
• Number Of Stocks: 287
• Top 10 Holdings: 50%
• Dividend Yield: 0.4%
• Equivalent Admiral Fund (VIGAX)

 

VTI vs VUG Performance

VTI and VUG have performed differently over the last 10 years, with VUG beating VTI by 3% annually.  However, that does not guarantee the next 10 years will look the same.

Over the last 5 years, VUG has outperformed VTI by 9%.

Here is their performance side by side:

Performance Comparison:

VTI (Blue)    VUG (Yellow)

As you can see, VUG has significantly beaten VTI over the last 10 years.

Similarities between VTI and VUG:

• Vanguard Exchange-Traded Funds (ETFs)
• Both Have Equivalent Admiral Funds (VTSAX & VIGAX)
• Low Expense Ratios

 

VTI and VUG Differences

The main difference between VTI and VUG is that VUG has fewer holdings focused on U.S. growth stocks.  Vanguard’s VTI has 12 times as many holdings and balances growth and value stocks.

Both are passively managed and have very low expense ratios (0.03% vs 0.04%).

By investing in ETFs with low expense ratios, you keep more of your returns.

This can make a big difference over time.

Differences between VTI and VUG:

• Number Of Holdings (3,535 vs 287)
• Index The Fund Tracks
• Asset Allocation

 

VTI Description

The Vanguard Total Stock Market ETF (VTI) can be described as the exchange-traded fund version of the VTSAX.  Since its inception in 2001, it has grown to be one of the most popular ETFs in the world.

Jack Bogle, who was a big believer in passive investing, created this fund.

VTI was created to let the average investor benefit from the growth of U.S. companies.  VTI’s most attractive features are broad range exposure to large-cap companies at a very reasonable expense ratio (0.03%).

Like VTSAX, VTI is a passive investment vehicle that is well-diversified and tracks the CRSP U.S. Total Market Index.

The fund is a market capitalization-weighted, with small-cap, mid-cap, and large-cap companies.

 

VTI Performance

Vanguard Total Stock Market ETF (VTI) has been at an all-time high, outperforming the outstanding S&P 500 over the last 20 years.

It’s no guarantee these all-time high returns will continue.

However, VTI remains one of the safest investments if you need a diversified portfolio at a low cost and with minimal turnover.

 

VTI Top Holdings

The fund has over $1.3 trillion in total net assets.

VTI comprises Apple, Microsoft, Google, Amazon, and Berkshire and provides exposure to over 3,000 stocks.

VTI Allocation includes:

• Technology: 24.2%
• Financials: 16.8%
• Healthcare: 14.8%

 

VUG Description

Vanguard Growth ETF (VUG) is an ETF focused on growth companies.  It was created in 2004 and has outperformed the S&P 500 ever since.  VUG has an admiral fund (VIGAX) with a slightly higher expense ratio and a minimum investment of $3,000.

For this reason, VUG is very popular.  The ETF also has a very low expense ratio of 0.04%, and there is no minimum investment.

The price-to-earning (P/E) ratio for VUG is 38.8x which is high.

The fund has $169 billion in total net assets.

 

VUG Performance

Vanguards Growth ETF (VUG) has outperformed the S&P 500 and, therefore, Vanguard 500 Index Fund ETF (VOO) over the last 10 years:

VUG (Blue)    S&P 500 (Yellow)

However, remember that this does not guarantee that the next 10 years will look the same.

 

VUG Top Holdings

Vanguard’s VUG comprises Apple, Microsoft, Google, Amazon, and Tesla and provides exposure to over 250 stocks.

The top 10 holdings make up 50% of the portfolio.  This means it isn’t very diversified compared to larger ETFs like Vanguard Total Stock Market Index Fund ETF (VTI).

 

No Minimum Investment

VTI and VUG are exchange-traded funds (ETFs) with no minimum investment.  Investors looking to buy fractional shares can use platforms like M1 Finance. ***(Get $50 When You Use This Link)***

Typically, 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 beneficial regarding VTI and VUG shares due to their high prices per share (~$236/share and ~$304/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)

 

Which is Better VTI or VUG?

Both VTI and VUG are great investments.  They both offer investors the ability to invest in high-growth companies at a low expense ratio (0.03% and 0.04%).

VUG offers more potential returns but also more volatility.

VTI offers increased diversification with solid fundamentals.

If you believe the success of VUG will continue and are willing to endure the higher volatility, then VUG makes for an excellent investment.

If you prefer more diversification with the absolute lowest expense ratio, then VTI would be a great choice.

 

Is VTI or VUG Better for Financial Independence?

VTI and VUG can get you to Financial Independence Retire Early (FIRE).  They are both Vanguard ETFs with low expense ratios.

We aim for the lowest fees possible in the FIRE community and are big fans of Vanguard.

The FIRE community is also a significant fan of VTI and VTSAX due to books like “The Simple Path To Wealth” by JL Collins.  I was able to interview JL Collins on the Inspire To FIRE Podcast.  We spoke about long-term investing in VTSAX.

I prefer the diversification that VTI provides.  It helps me sleep at night knowing I own a small piece of every publicly traded company in the United States.

Similar Comparisons:

• VT vs VTI
• QQQ vs VUG
• VXUS vs VTI
• VUG vs VOO
• MGK vs VUG
• VUG vs VOOG

 

My Winner: VTI

My winner is VTI, solely based on the increased diversification.  The fact that VTI provides exposure to the whole US stock market can give long-term investors the conviction to buy during bear markets.  It can also provide a smoother ride toward building wealth.

Lastly, the low expense ratio will likely stay that way because Vanguard has no incentive to increase its fees.

This is a big reason VTI and VTSAX are fan favorites in the FIRE community.