VIG vs. VOO & VTI – Vanguard Dividend Growth ETF vs. Broad Market

VIG is Vanguard's dividend growth ETF. VOO and VTI are their broad market index funds for the S&P 500 Index and total U.S. stock market, respectively. Let's compare them.

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VIG vs. VOO and VTI – Methodology and Composition

We can compare VIG to both VOO and VTI at the same time, as VTI is the total U.S. stock market and VOO, being the S&P 500, is a sufficient barometer for the entire U.S. stock market. In other words, VOO comprises roughly 82% of VTI by weight and the 2 perform nearly identically. I delved into comparing VOO and VTI here.

VIG, established in 2006, is the Vanguard Dividend Appreciation ETF. As the name implies, this ETF captures dividend growth stocks, companies with a historically increasing dividend. VIG seeks to track the S&P U.S. Dividend Growers Index. These are U.S. companies with a growing dividend over at least the past 10 years. The fund excludes the top 25% highest yielding stocks, as high yield is sometimes a sign of an unstable company. Holdings are market cap weighted and are capped at 4%. In terms of factor exposure, VIG provides appreciable exposure to both the Profitability and Investment factors but actually has small negative loadings on Size and Value.

VOO is the Vanguard S&P 500 ETF. Established in 2010, it is one of the most popular ETFs out there. The fund seeks to track the famous S&P 500 Index, a market cap weighted index of over 500 U.S. large-cap stocks across all sectors. This index is considered a barometer for the U.S. stock market.

VTI is the Vanguard Total Stock Market ETF. It was established in 2001. VTI provides similar broad exposure to the U.S. stock market, but also includes small- and mid-cap stocks. Specifically, VTI is about 82% large cap stocks, 12% mid cap stocks, and 6% small cap stocks. Put another way, VOO comprises roughly 82% of VTI by weight. VTI seeks to track the CRSP US Total Market Index. This ETF has over 3,500 holdings. Consequently, VTI can be considered more diversified than VOO.

All three of these funds only hold stocks in the United States. Both VOO and VTI include REITs, while VIG does not.

Sector weightings are naturally very different for VIG than for VOO or VTI:

Notice how VIG drastically underweights Telecom, Energy, and Real Estate stocks relative to the market. Specifically, VIG only comprises about 1/3 of the market by weight.

Thus, in my opinion, VIG alone would not be sufficient as a core holding for a diversified investment portfolio, and should probably only be used to tilt, or overweight, dividend growth stocks in one's portfolio. This may be attractive for dividend investors; I'm not a dividend investor, but I did design a dividend-focused portfolio that incorporates VIG. Put another way, VIG provides naive exposure to the Profitability and Investment factors.

VIG vs. VOO and VTI – Historical Performance

Going back to 2006 when VIG launched, VOO has beaten it handily through 2021, delivering a higher general and risk-adjusted return over the time period:

VIG vs. VOO and VTI – AUM and Fees

Though all three of these funds are highly liquid and very popular, Vanguard's VOO and VTI are much more popular than VIG with over $550 billion and $900 billion in assets, respectively, compared to about $60 billion for VIG.

VIG has an expense ratio of 0.06%, while both VOO and VTI cost half that with an expense ratio of 0.03%.

Conclusion

Investors seeking broad, diversified exposure to the U.S. stock market should use VOO or VTI as a core holding. VIG is basically holding U.S. large-cap dividend growth stocks with robust Profitability and a conservative investment approach. Also remember VIG either excludes or underweights Energy, Telecom, and Real Estate stocks.

VOO and VTI have outperformed VIG going back to VIG's inception in 2006 on both a general and risk-adjusted basis.

VOO and VTI are also more popular and slightly cheaper than VIG.

Conveniently, all these funds should be available at any major broker, including M1 Finance, which is the one I'm usually suggesting around here.

Disclosure: I am long VOO in my own portfolio.

Disclaimer:  While I love diving into investing-related data and playing around with backtests, this is not financial advice, investing advice, or tax advice. The information on this website is for informational, educational, and entertainment purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a research report. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. I always attempt to ensure the accuracy of information presented but that accuracy cannot be guaranteed. Do your own due diligence. I mention M1 Finance a lot around here. M1 does not provide investment advice, and this is not an offer or solicitation of an offer, or advice to buy or sell any security, and you are encouraged to consult your personal investment, legal, and tax advisors. Hypothetical examples used, such as historical backtests, do not reflect any specific investments, are for illustrative purposes only, and should not be considered an offer to buy or sell any products. All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future results. Opinions are my own and do not represent those of other parties mentioned. Read my lengthier disclaimer here.