VOO vs. VTI–S&P 500 Index versus Total Stock Market Index Fund⛱ [ATF Text]: [ATF URL] Click “Show More” to see Ad Disclosure
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0:00 Introduction
1:20 VOO vs VTI
8:40 S&P 500 vs Total Stock Market Returns
13:43 How to Choose
I’ve been investing for over 30 years and writing about investing for the past over 15 years. One of the questions I get quite a lot is in a portfolio, should you invest in an s&p 500 index fund, or a total stock market index fund? And it’s a good question. And it’s one that sort of torments folks. I don’t think it needs to; actually I think the answer is really, really simple. But the explanation takes a little time. We’re going to walk through that today. And what we’re going to do is we’re going to compare two Vanguard ETFs, we’re gonna first compare the s&p 500 index ETF, which is ticker VOO. And then the vanguard ETF that covers the total US stock market, and that’s ticker VTI.
They’re good representations of the two markets that they cover. And it’s interesting, because what we’re going to learn is there are a lot of significant differences between the two funds, the two types of investment strategies, s&p 500 versus total stock market.
#voo #vti #investing
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While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I’m the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
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When it comes to investing in the stock market, there are various options available to individuals looking to grow their wealth. Two popular choices for investors are the Vanguard S&P 500 ETF (VOO) and the Vanguard Total Stock Market ETF (VTI).
Both VOO and VTI are index funds that aim to replicate the performance of the overall stock market. However, there are some key differences between the two funds that investors should consider before making a decision.
The first major difference is in the composition of the indexes that the funds track. VOO tracks the S&P 500 Index, which is made up of 500 of the largest publicly traded companies in the United States. This index is widely regarded as a benchmark for large-cap stocks and comprises about 80% of the market capitalization in the US stock market.
On the other hand, VTI tracks the CRSP US Total Market Index, which includes all investable stocks in the US market, both large-cap and small-cap. This index represents approximately 100% of the investable US equity market and offers investors exposure to a broader range of companies.
Another important difference is the expense ratio associated with each fund. VOO has a slightly lower expense ratio of 0.03%, compared to VTI’s expense ratio of 0.04%. This means that VOO is slightly more cost-effective for investors, especially those looking to make long-term investments. However, the difference in expense ratios is minimal and may not be a significant factor for most investors.
While both funds offer diversification and exposure to the US stock market, the performance of VOO and VTI can vary due to their differing compositions. Over the long term, VTI has displayed slightly higher returns compared to VOO, mainly because it includes exposure to small-cap stocks that have historically outperformed large-cap stocks. However, during periods when large-cap stocks dominate the market, VOO has demonstrated stronger performance.
Investors should also consider their risk tolerance when choosing between the two funds. VTI, with its broader exposure to small-cap stocks, can be slightly more volatile than VOO. Some investors may prefer the stability and predictability of VOO, while others might be willing to take on increased risk for potentially higher returns with VTI.
Ultimately, the choice between VOO and VTI depends on an individual’s investment goals, risk tolerance, and desired level of diversification. For those seeking exposure to the largest and most established companies in the US, VOO is a solid choice. However, investors looking for broader market exposure and potentially higher returns may lean towards VTI.
It is important to note that both VOO and VTI are long-term investments that perform best when held for extended periods. Regardless of the fund chosen, investors should carefully evaluate their financial goals and consult with a financial advisor before making any investment decisions.
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I don’t see the link for the 6 fund portfolio you mentioned @15:38. Am I overlooking it?
Thank you for this clear explanation and concluding remarks. We are trying to decide now exactly which funds to settle into for retirement. This was very helpful.
Flip a coin. Heads or tails you are a guaranteed winner.
Rob, my biggest concern with VOO, or any ETF, is that I know many folks are trying to time how they drop in their money to save a few bucks, depending on how much you drop in. Does it really matter if I plan to hold for 25-30 years anyways?
With VOO at like $378 today should I wait for a market correction to get started investing in VOO? I know you can;t time the market but should I get in when its high like it is now? Can i even make money getting into VOO when its high? Hope this question makes sense.
Great video. Is there any pros or cons to owning both?>
I am looking for the 6 fund portfolio link you mentioned in the video? Thx Rob…Great Video!
I personally like that you can compare the returns of an S&P500 index fund to the actual S&P500 index more easily over any time frame. It gives me that extra bit of confidence that the fund is investing in what it says it is, and returning the market rate it should.
Go over expense fee?
Good vid. Can we get a VTI vs. SCHB? They both look identical to me, but I may be missing something.
The best thing money can buy is financial freedom
Wall Street pitched so-called quality stocks with high profitability and low debt, as a kind of insurance against whatever the economy might throw at you. Quality stocks have underperformed the S&P500 this year, waiting may not be the best decision for investors. It might sound basic or generic, but getting in touch with a financial adviser was how I was able to outperform the market and raise a profit of $350,000 since Jan 2022. For me, its the most ideal way to jump into the fin-market these days.
Hey, I've been watching you a lot lately. I want to know what is the best investment in today's economy. I have $3000 to spare monthly; I want to invest into a fund that is a no brainer, invest and hold for long term. Based on watching a lot of your videos, I believe the best is to invest into a 60/40 and just sit back. OR is there a better way? Thanks.
Hi Rob – along these lines, I have been comparing VFIAX to VOO, since I own a large position in VFIAX but it costs an additional basis point in fees over VOO. On a large holding, this difference adds up to real money over time. One would think that the only difference in performance would be attributable to the difference in management fee. Yet, when I compare the two in Portfolio Visualizer, it appears that the Admiral Shares actually out-perform VOO. Do you know why that might be, assuming the data is correct?
Thank you!
Can’t go wrong with either one imo
What is the equivalent of VOO on fidelity? Do you prefer Vanguard over Fidelity?
Had both now only have VTI
Thanks I'm retired so I guess I will stay with FIdelity.
Rob, do you still recommend using M1 finance?
Great videos! I’m learning so much. What do you think about QQQ?
One of the best finance channels on YouTube!
Hey Rob , why do seem to favor Vanguard over Fidelitys S&P fund when the Fidelity fund is much less expenvice on manage cost for the fund ?
Really helpful, Rob. I just divide up the equity portion of my portfolio 50/50 between FXAIX (s&p 500 index) and FSKAX (total U.S. stock mkt). Everyone's different; for me, having a little more exposure to mid and small caps than an s&p 500-only portfolio feels right.
If you read the little book of common Sense investing you'll see how the creator of voo & vti which is John Bogle stated that they are basically the same regardless of which you pick the return difference are minute
is forty years old too late to start investing in etfs.
Just hold both
Top 2 tech top 2 index
Thank me in 10y
I like the VOO + VBR combo.
Great video. What I’ve come to believe is it’s better to invest as much money as possible as soon as possible, rather than agonize over the perfect fund. Maybe buy 3-5 funds and just keep investing!
Well explained…I think a lot of people suffer from analysis paralysis
According to the inflation calculator, the $500/mo. you started with in 1972 has become $3350/mo. by 2022. Not sure it's a realistic scenario since you would have probably retired somewhere in that 50 year span.
I may buy VTI or VOO, a mid cap growth, and a small cap growth.
You get that shirt from H&M? I have the same one
OR, BOTH?
Hi Bob, I live in Australia and am late to investing. Over a 5 to 10 year period should I invest in growth stocks or an index fund?
My wife is just starting her vanguard 403b : thoughts about this allocation :
40% total market vtsax
30% s and p vfiax
10% international index
10% low cap growth index
10% bond index
She is 40 years old and plans to retire at 64
11:50 – Also $500 in 1972 was a LOT of money to be investing monthly as a young person with 50 years to go. It would be like starting today with $3500 a month. You'd have to be a CEO's son.