VUG vs. VOO | Vanguard Growth vs. S&P 500
Comparing VUG vs. VOO: Learn the historical performance, key differences, and which Vanguard ETF may be better for your portfolio.
Key Takeaways
VUG and VOO are both ETFs that track the performance of the U.S. stock market, but they have different compositions and strategies.
VUG tracks the CRSP US Large Cap Growth Index, which includes large-cap U.S. growth stocks, while VOO tracks the S&P 500 Index, which includes 500 large-cap U.S. stocks.
VOO may be a better option for investors seeking broad exposure to the U.S. stock market, while VUG may offer more growth potential but with greater volatility.
Both funds have relatively low expense ratios and are good long-term investment options.
VUG (Vanguard Growth) vs. VOO (Vanguard S&P 500)
Vanguard offers a wide range of exchange-traded funds (ETFs) that provide investors with a low-cost and efficient way to gain exposure to different segments of the stock market. Two of the most popular Vanguard ETFs are VUG (Vanguard Growth) and VOO (Vanguard S&P 500).
VUG focuses on large-cap growth stocks, while VOO tracks the performance of the S&P 500 index. Both ETFs have attracted a lot of attention from investors looking for exposure to the stock market, but which one is right for you?
In this article, we'll provide a detailed comparison of VUG and VOO, including their investment strategies, fees, historical performance, and other key factors that investors should consider when choosing between them.
We'll also explore whether it makes sense to invest in both ETFs and provide guidance on making informed investment decisions that align with your goals and risk tolerance.
VUG Details
Expense Ratio: 0.04%
Dividend Yield: 0.68%
10yr Return: 13.44%
VOO Details
Expense Ratio: 0.03%
Dividend Yield: 1.57%
10yr Return: 12.64%
VUG vs. VOO Historical Performance
When deciding between VUG and VOO, one of the key factors that investors may consider is historical performance. Let's take a closer look at how each ETF has performed over the past 10 years.
According to data from Vanguard, VOO has delivered a 10-year return of 12.64% as of February 22, 2023. VOO's performance is primarily driven by the companies in the S&P 500 index, representing a broad cross-section of the U.S. stock market.
In comparison, VUG has delivered a 10-year return of 13.44% as of February 22, 2023. VUG's investment strategy focuses on large-cap growth stocks, which have generally outperformed the broader market over the past decade. As a result, VUG has delivered higher returns than VOO over this time period.
When comparing VUG and VOO, investors should consider historical performance in the context of their investment goals and risk tolerance. While VUG has delivered higher returns over the past decade, it may also be subject to greater volatility than VOO due to its focus on growth stocks. Investors prioritizing long-term growth may be more inclined to choose VUG, while those prioritizing stability and broad market exposure may prefer VOO.
VUG Holdings
VOO Holdings
VUG vs. VOO Differences
While VUG and VOO share some similarities, investors should be aware of the significant differences between the two ETFs.
Investment Strategy
One of the main differences between VUG and VOO is their investment strategy. VOO seeks to track the performance of the S&P 500 index, which is composed of 500 large-cap U.S. companies.
Conversely, VUG focuses on large-cap growth stocks, which are companies with the potential for above-average earnings growth. This difference in investment strategy can lead to significant differences in the composition and performance of the two ETFs.
Composition
Because VOO tracks the S&P 500 index, its holdings are relatively stable over time. The index is weighted by market capitalization, so the largest companies in the index (such as Apple, Microsoft, and Amazon) have the greatest impact on its performance.
VUG's composition, on the other hand, is based on the investment team's analysis of companies with strong growth potential. As a result, VUG's holdings may change more frequently and be more concentrated in certain sectors or industries.
Fees
Another key difference between VUG and VOO is their fees. As of February 22, 2023, VOO has an expense ratio of 0.03%, which is extremely low for an ETF. VUG's expense ratio is slightly higher at 0.04%. While this may seem like a small difference, it can add up and impact an investor's returns over time.
Complementary Strategies
Despite these differences, VUG and VOO can also complement each other in a well-diversified investment portfolio. For example, investors may choose to hold both ETFs to balance out exposure to growth and value stocks or to increase exposure to specific sectors or industries.
VUG vs. VOO | Which is Better for Your Portfolio?
When choosing between VUG and VOO, investors should consider various factors to determine which ETF suits their needs and investment goals better.
Risk Tolerance
One of the most important factors to consider is your risk tolerance. VUG's focus on growth stocks may make it more volatile than VOO, which tracks a more stable index. Investors with a higher risk tolerance and a longer investment time horizon may be more comfortable with the potential risks and rewards of investing in VUG. In contrast, more risk-averse investors may prefer the stability of VOO.
Portfolio Composition
Another important factor is how VUG and VOO fit into your overall investment portfolio. VUG's focus on growth stocks may complement other value-oriented investments, while VOO's broad exposure to the U.S. stock market may be a good choice for investors seeking a core holding. Considering how VUG and VOO fit into your overall asset allocation strategy and risk management plan is important.
Investor Preference
Ultimately, the choice between VUG and VOO may come down to personal preference. Some investors may prefer the potential for higher returns offered by VUG, while others may prefer VOO's stability and low fees. It is important to carefully consider your investment goals, risk tolerance, and overall portfolio strategy before making a decision.
Should I invest in VUG and VOO?
Investing in VUG and VOO can provide investors with exposure to the U.S. stock market and the potential for long-term growth. However, it's important to consider the potential benefits and drawbacks of investing in each ETF, as well as how to allocate your portfolio between them.
Investors may choose to allocate their portfolios between VUG and VOO based on their individual investment goals and risk tolerance. For example, an investor seeking higher potential returns may choose to allocate a larger portion of their portfolio to VUG, while an investor seeking a more conservative approach may choose to allocate more to VOO.
