VOOG vs. VTI - Which is Best For You?
VOOG and VTI are two low-cost investment ETFs investors are commonly drawn to, but they have some differences.
In this comprehensive guide, we’ll compare the Vanguard S&P 500 Growth ETF (VOOG) versus the Vanguard Total Stock Market ETF (VTI).
VOOG vs. VTI Overview
VOOG and VTI are both offerings from Vanguard—one of the leading providers in low-cost ETFs—but they track different indices and offer differing exposures to the U.S. market.
VOOG is an ETF that tracks the S&P 500 Growth Index. This means it invests in large-cap U.S. companies that exhibit growth characteristics, like high price-to-book ratios and strong projected earnings growth.
On the other hand, VTI is an ETF that seeks to mirror the performance of the CRSP US Total Market Index. This consists of virtually all U.S. stocks, representing almost the entire U.S. equities market, comprising small, mid, and large-cap growth and value stocks.
Expense Ratio Comparison
VOOG - 0.08%
VTI - 0.03%
VOOG has an expense ratio of 0.08%. This means for every $1,000 you invest, about $0.80 will be used each year to cover fund expenses.
Conversely, VTI has an even lower expense ratio of 0.03%. So, for every $1,000 invested, VTI costs only $0.30 yearly to manage the fund.
This critical difference means that, when considering solely expense ratios, VTI is arguably the more cost-efficient choice. However, both of these expense ratios are much lower than the overall average.
Dividend Yield Comparison
VOOG - 1.15%
VTI - 1.40%
As of writing, VOOG has a dividend yield of 1.15%. Consequently, if you invested $1,000, you could expect $11.50 in dividends annually.
VTI offers a higher dividend yield at 1.40%. Hence, a $1,000 investment means approximately $14.00 in annual dividends.
Once more, if looking at dividend yield without considering other factors, VTI emerges as a more attractive choice for folks focused on income generation.
Holdings Comparison
Both VOOG and VTI have top holdings that are primarily U.S.-based multinationals, with companies like Apple Inc., Microsoft Corp, and Amazon.com Inc. featuring in the mix.
VOOG’s top 10 holdings make up around 46.14% of its total assets, a concentration that can pose risk but also provide significant returns if these companies perform well.
VTI, although it also holds these companies within its top 10, is much more diversified, with its top 10 holdings comprising only about 26.29% of its total assets, spreading the risk more evenly across several sectors and sizes of companies.
So, in terms of direct competition, VTI once again shines as a choice for diversification. But there’s another important point we need to dissect: performance.
Performance Comparison
The performances of these ETFs naturally vary, given they track different indices. VOOG has typically performed well during bull markets, particularly in times when growth stocks outperform the broader market. This is largely due to its focus on large-cap growth stocks, which tend to rise significantly during economic expansions.
On the other hand, VTI, owing to its total market strategy, can not only capture the profitability of large-cap growth stocks but also includes small and mid-cap stocks, which have historically offered higher returns over the long term.
VTI, therefore, might be a better performer in the long run simply because of its broad diversification.
VOOG vs. VTI - Which is Better for You?
In the end, the choice between VOOG and VTI will largely depend on your investment goals, risk tolerance, and investment horizon.
If you are bullish on growth stocks in the short term, then VOOG could be a good choice because it targets the fastest-growing large-cap companies. This also means that it may carry more risk because growth stocks can be more volatile.
VTI, in contrast, could be a better choice for those seeking broad exposure to U.S. equities, with its diversity offering a degree of in-built stability compared to the more concentrated portfolio of VOOG.
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