Two of the most popular stock market index ETFs are the Vanguard S&P 500 ETF (VOO) and the Vanguard Total Stock Market ETF (VTI). Here we’ll dive into their differences, similarities, and performance.
In a hurry? Here are the highlights:
- VOO and VTI are the two most popular U.S. stock market ETFs out there. Both are from Vanguard.
- VOO tracks the S&P 500 Index. VTI tracks the CRSP US Total Market Index.
- As such, VOO is entirely large-cap stocks, while VTI also includes small- and mid-cap stocks.
- Specifically, VOO comprises roughly 82% of VTI by weight.
- Consequently, VTI has been – and should be expected to be – slightly more volatile than VOO.
- Since it contains small- and mid-caps, which have outperformed large caps historically due to the Size factor premium, we would expect VTI to outperform VOO over the long term, and indeed it has historically.
- VOO has roughly 500 holdings and VTI has roughly 3,500 holdings, so VTI can be considered more diversified.
- Both VOO and VTI have the same expense ratio of 0.03%.
- VTI is much more popular than VOO.
Contents
VOO vs. VTI – Differences in Methodology and Composition
If you’ve landed here, you probably already know that stocks are a significant driver of portfolio returns, and that index funds are a great, low-cost way to get immediate, broad diversification across asset classes. You also probably already know that Vanguard has some of the lowest fees around and has a solid track record of providing ETFs that accurately track their indexes.
The Vanguard S&P 500 ETF (VOO) is one of the most popular stock ETFs out there. It was established in 2010. The fund seeks to track the famous S&P 500 Index, holding the 500 largest U.S. companies. This index is considered a sufficient proxy and barometer for “the market” in the U.S. The mutual fund equivalent for VOO is VFIAX.
The Vanguard Total Stock Market ETF (VTI) provides similar broad exposure to the U.S. stock market, with the addition of small- and mid-caps. It was established in 2001. The fund seeks to track the CRSP US Total Market Index. This ETF holds over 3,500 U.S. stocks across all cap sizes. Specifically, VTI is comprised of roughly 82% large-cap, 12% mid-cap, and 6% small-cap stocks. In other words, VOO comprises roughly 82% of the broader VTI. Put more simply, VOO is already inside of VTI. The mutual fund equivalent for VTI is VTSAX.
People hear of these two popular ETFs and wonder which one they should go with, or if they should utilize both. It is one of the questions I see asked most often on Reddit.
The only real difference between VOO and VTI is that VTI includes small, mid, and large cap stocks, while VOO is only large-cap stocks. Since VTI is market cap weighted, meaning weighted by the size (the market capitalization) of the constituent stocks, about 82% of VTI’s weight is VOO, with the other 18% being those smaller companies. That 18% is about 3,000 stocks.
Since small- and mid-cap stocks tend to be more volatile than large-caps, VTI should be – and has been – slightly more volatile than VOO. Because VOO holds about 500 stocks and VTI holds about 3,500, VTI can also be considered more diversified than VOO.
Now let’s look at the performance of VOO vs. VTI.
VOO vs. VTI – Historical Performance
Note that small- and mid-cap stocks have outperformed large-caps historically because they are considered riskier; this is known as the Size risk factor premium. Thus, we would expect VTI to slightly outperform VOO over the long term, and indeed it has historically, using their underlying indexes going back to 1972:
As we’d also expect due to its inclusion of smaller stocks, VTI has been slightly more volatile than VOO, meaning its variability of returns – measured by standard deviation – has been greater. VTI has delivered a higher return, but the risk-adjusted return (Sharpe) of these funds is identical.
VOO vs. VTI – AUM and Fees
Though both funds are highly liquid and extremely popular, Vanguard’s VTI is much more popular with over $910 billion in assets under management. VOO has roughly $550 billion in assets.
Expense ratio for these funds is the same at a low 0.03%.
Conclusion
VOO and VTI are highly correlated, as the former makes up about 82% of the latter by weight. Because of this, their historical performance has been very close, but we would expect VTI to slightly outperform VOO over the long term due to its inclusion of small- and mid-cap stocks, and indeed it has historically. Conveniently, VTI can also be considered more diversified, as it holds about 3,000 more stocks than VOO. This contrasting number of holdings and subsequent cap size exposure is the primary difference between VOO and VTI.
The investor who for some reason is only seeking lower volatility large-cap stocks will want to go with VOO, tracking the S&P 500 Index. Those desiring greater diversification and greater expected returns, at the cost of slightly greater volatility, will want to go with VTI to capture the entire U.S. stock market. Alternatively, you might use VOO in combination with a small cap value fund; that’s what I do in my own portfolio.
In any case, both VOO and VTI are solid choices to get broad exposure to the U.S. stock market. Some employer-sponsored retirement plans may only offer one of these funds and not the other. Keep in mind you may see their mutual fund equivalents, which are VFIAX for VOO and VTSAX for VTI.
Disclosure: I am long VOO and VTI in my own portfolio.
Disclaimer: While I love diving into investing-related data and playing around with backtests, I am in no way a certified expert. I have no formal financial education. I am not a financial advisor, portfolio manager, or accountant. This is not financial advice, investing advice, or tax advice. The information on this website is for informational and recreational purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. Do your own due diligence. Past performance does not guarantee future returns. Read my lengthier disclaimer here.
Hi John. Thanks for your hard work.
I got a bit of a newbie question. You wrote above that “VTI is comprised of roughly 82% large-cap, 12% mid-cap, and 6% small-cap stocks.” But Fidelity lists VTI as 72.4% large-cap, 19.12% mid-cap, 6.21% small-cap, 2.27% micro-cap. https://screener.fidelity.com/ftgw/etf/goto/snapshot/portfolioComposition.jhtml?symbols=VTI
Why is there such a big difference between the numbers for large and mid cap? I ask because I’m trying recreate a total market index fund at my 401K. I looked up VTI on fidelity before remembering you recently wrote this article.
Thanks for your help and insight.
Just depends on where they put the dividers for defining the different cap sizes based on market cap. The S&P 500 is about 82% of VTI, and we refer to the S&P 500 colloquially as “large caps,” but technically you could argue some of them at the bottom are mid-caps. This page might help.
In any case, I wouldn’t worry about it too much.