Investors desiring to own the entire market or close to it can do so with two popular exchange-traded funds (ETFs). Both are from Vanguard, and they are giant ETFs with hundreds of billions of dollars in assets under management (AUM). The funds are the Vanguard Total Stock Market Index Fund ETF (VTI) and the Vanguard 500 Index Fund ETF (VOO), two popular ETFs offered by the fund manager. This article compares VTI vs. VOO to determine which low-cost ETF is better.

Vanguard is a mutual fund firm founded by John Bogle, the father of index funds. It is known for its array of low-cost index funds and ETFs. Investing in funds with minimal expense ratios is an advantage. Bogle has said,

“Where returns are concerned, time is your friend. But where costs are concerned, time is your enemy.”

The bottom line is costs subtracted from total returns. Although both VTI and VOO follow distinct indices, they are similar in their low expense ratios. Because choosing between the two may be difficult, we analyze both to assist in your task.

Vanguard Total Stock Market Index Fund ETF (VTI)

The Vanguard Total Stock Market Index Fund ETF (VTI) seeks to track the CRSP US Total Market Index. Consequently, the fund owns large, mid, and small-cap stocks. However, the market capitalization weighting means it possesses many of the biggest companies in the index at higher weightings. The ETF holds 3,883 stocks compared to 3,863 in the benchmark.

The fund started on May 24, 2001. Because it is from Vanguard, the expense ratio is low at 0.03%, costing $3 for every $10,000 invested.

However, the 30-day SEC yield is only 1.56% because the mega-cap stocks distribute a low or no dividend. Stocks like Amazon, Google, Berkshire Hathaway, and Meta Platforms are in the top 10 but do not pay dividends. 

Portfolio Composition

The total AUM is $1.3 trillion, with $285.5 billion in the share class, making it one of the top five ETFs. Because the fund is market-cap weighted, the fund is influenced by its large-cap portfolio of Apple (AAPL), Microsoft (MSFT), Amazon.com (AMZN), NVIDIA (NVDA), Alphabet (GOOG, GOOGL), etc. As a result, it performs well when tech does so.

The VTI ETF has a significant representation of Information Technology sector stocks at 30.1%. The next three sectors represented in the fund are Consumer Discretionary (14.0%), Health Care (13.2%), and Industrials (12.6%). The sector weightings essentially match the benchmark.

The top 10 holdings of VTI:

The top 10 holdings make up about 25.76% of the fund.

Vanguard S&P 500 ETF (VOO)

Vanguard also manages the Vanguard S&P 500 ETF (VOO). It is a popular choice from the Vanguard ETF list. The ETF follows the performance of the S&P 500 Index, which encompasses the 500 largest companies on U.S. stock exchanges. The fund currently holds 505 stocks, slightly higher than the 503 in the benchmark index.

The ETF’s inception date was September 7, 2010. It has a minimal expense ratio of 0.03%, assessing $3 for every $10,000 invested. This fact is important because low costs are an advantage for total returns over lengthier periods. On the other hand, high expense ratios detract from a fund’s performance.

But the 30-day SEC yield is only 1.57% because many stocks in the index have low dividend yields or do not pay a dividend at all.

Portfolio Composition

The ETF has $823.1 billion under management, with $296.3 billion in the share class, making the fund one of the three largest ETFs by AUM. Also, because the VTI follows the S&P 500 Index, it owns many mega-cap tech stocks, like Apple (AAPL), Microsoft (MSFT), Amazon.com (AMZN), Nvidia (NVDA), etc.

The VOO ETF has nearly 30% of its assets in the Information Technology sector. Health Care is next at 13.7%, Financials at 12.4%, and Consumer Discretionary at 10.2%. The four sectors sum to approximately 64.4% of total assets.

The top 10 holdings of VOO:

The top 10 holdings make up about 30.26% of the fund.

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Similarities: VTI vs. VOO

VTI and VOO are two of the most popular Vanguard ETFs. The two ETFs have more similarities than differences because of their Vanguard parent and portfolio composition.

• Passively managed ETFs from Vanguard.
• Matching low expense ratios.
• The same top sector, Information Technology.
• Identical top five stocks and top 10 stocks.
• Comparable volatility.
• Almost precisely the same SEC yield.

Despite the similarities, the funds are still different. Below we discuss the contrast between VTI vs. VOO.

Differences: VOO vs. VTI

Checking the differences, a few apparent ones are:

• VTI owns 3,883 stocks, while VOO has 505 holdings.
• VOO has $296.3 billion in assets. VTI has $288.9 billion in assets.
• VTI aims to track the CRSP US Total Market Index. VOO follows the S&P 500 Index.

Benchmark Index

In comparing, VOO vs. VTI, the primary distinction between them is the benchmark index. VOO follows the S&P 500 Index, while VTI seeks to replicate the CRSP US Total Market Index. However, both indices are market weighted.

The S&P 500 Index consists of the 500 largest companies on U.S. stock exchanges. Market capitalization is the main criterion for inclusion. Even though the index does not encompass the entire stock market, it represents most of the total market performance and capitalization.

On the other hand, the CRSP US Total Market Index consists of almost the total market of small, mid, and large-cap stocks.

The dissimilar indices the two ETFs use mean VOO holds fewer stocks and has a greater median market capitalization than VTI. VOO owns 505 stocks, and the median market cap is $190.2 billion. VTI holds 3,883 stocks, with a median market cap of $123.7 billion.

Because of the different benchmarks, the ETFs emphasize slightly different stock styles. The VOO ETF holds 82% in large-cap stocks, 17% in mid-cap stocks, and zero in small-cap stocks. Instead, VTI has approximately 72% large-cap, 20% mid-caps, and 9% small-cap stocks.

Sector Differences

Although the top ten stocks are the same, differences occur in the sectors because the indices and the method tracking the benchmark vary. VTI employs a sampling technique, while VOO closely matches the index.

However, both ETFs are diversified across all 11 sectors, although the top three sectors vary. But Information Technology has the greatest percentage for both VTI and VOO.

Overall Performance

Comparing the performance of VTI vs. VOO, the outcomes are similar but not an exact match; because of its large and mega-cap weighting, VOO has slighted edge on 1-year, 3-year, 5-year, and 10-year periods. Both VOO and VTI nearly match their benchmarks.

The VOO ETF has a 5-year annualized return of 10.97% and a cumulative total return of 68.31%. It has a 10-year annualized return of 11.94% and a cumulative total return of 209.04%. Since its inception in 2010, the annualized return has been 13.29%, and the cumulative total return was 389.50%.

The VTI ETF has a 5-year annualized return of 9.99% and a cumulative total return of 61.01%. It has a 10-year annualized return of 11.40% and a cumulative total return of 194.29%. Since its inception in 2001, the annualized return has been 7.78%, and the cumulative total return was 420.74%.

VTI vs. VOO: Which is Better for You?

When VOO vs. VTI, which is better for you? The two popular ETFs are similar in many ways because they emphasize large-cap stocks. Moreover, they have extremely low expense ratios. But VOO has performed better in trailing periods and from inception. However, VTI has the disadvantage of existing through more bear markets than VOO, impacting its returns since inception.

An investor would probably do well with either one in a core portfolio, like the Coffeehouse Portfolio. But VOO has a slight performance edge. In addition, Warren Buffett recommends it for a two-fund portfolio.

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