Investors continue to explore passive investing strategies as exchange-traded funds (ETFs) gain popularity for their cost efficiency and broad market exposure. Vanguard remains a leading choice for many, offering funds that cater to both new and experienced investors. Two of its most well-known ETFs, the Vanguard S&P 500 ETF (NYSE: VOO) and the Vanguard Total Stock Market ETF (NYSE: VTI), provide exposure to the U.S. equity market but differ in scope. Investors often compare these funds to determine which aligns best with their financial goals and risk tolerance.
Vanguard’s ETFs have consistently attracted investors due to their low expense ratios and diversified market exposure. Previously, VOO has been favored for its close alignment with the S&P 500, while VTI’s broader market reach has appealed to those seeking exposure beyond large-cap stocks. Over time, both funds have delivered strong returns, with VOO closely mirroring the market’s largest companies and VTI incorporating mid- and small-cap stocks for added diversification.
How does Vanguard S&P 500 ETF perform?
VOO tracks the S&P 500 index, providing investors access to the largest U.S. companies, including Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), and Nvidia. With an expense ratio of 0.03%, it offers a cost-effective way to gain exposure to major corporations. The fund holds 505 stocks, primarily concentrated in technology, financials, and healthcare, and has an Assets Under Management (AUM) of $498.5 billion. Over the past year, VOO has delivered a return of 26.34%, while its five-year performance stands at 15.12%.
What makes Vanguard Total Stock Market ETF different?
Unlike VOO, VTI tracks the CRSP US Total Market Index, covering large-, mid-, and small-cap stocks. This broader exposure results in a higher number of holdings, with 3,615 stocks included in the fund. VTI’s expense ratio remains at 0.03%, and it has an AUM of $421.1 billion. Its one-year return is 22.79%, while its five-year return is 14.48%. The fund’s sector allocation is similar to VOO, with a significant focus on technology, consumer discretionary, and financial stocks.
Both ETFs share the same top holdings, including Alphabet, Amazon, and Tesla. However, VTI’s inclusion of smaller companies allows for greater diversification. This broader market exposure can help stabilize returns when large-cap stocks experience downturns, making it appealing to investors seeking reduced volatility.
Choosing between these ETFs depends on an investor’s preference for market coverage and risk management. VOO serves as a direct investment in the largest U.S. companies, offering stability and market-tracking potential. On the other hand, VTI provides a more comprehensive view of the entire U.S. stock market, which may benefit those seeking exposure to a wider range of companies.
Investors looking for a fund that closely follows the S&P 500 may find VOO more suitable, while those wanting broader market exposure might prefer VTI. Performance differences between the two historically have been minimal, but VTI’s inclusion of smaller-cap stocks introduces opportunities for additional growth. Understanding individual investment goals and market outlooks will play a key role in selecting the appropriate ETF.
