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. In this post we will compare Vanguard ETF’s VOO vs VTI. VTI approximates entire u.s. market, a few thousand companies. It appears almost identical to VTI. The information on this website is for informational and recreational purposes only. There are very few funds on the market at the moment that can provide similar exposure to the domestic market at a similar or lower fee. VTI or VIG? Although the cost may seem low even 0.03% can turn into much more over a lifetime of compounding. This website uses cookies to improve your experience while you navigate through the website. Overview of VT and VTI. VTI tracks the entire stock market, while VOO focuses on the major players that make up the S&P 500. This number lies slightly below the average return of the S&P 500 for the last 30 years., however, VTI still outperforms most other funds and bonds over the long term. I'm not a big fan of social media, but you can find me on LinkedIn and Reddit. are for illustrative purposes only. What’s The Difference between VTI and VIG? Those desiring more risk, more diversification, and/or wanting to bet on small- and mid-caps will want to go with VTI to capture the entire U.S. stock market. VOO and VTI are the two most popular U.S. stock market ETFs out there. 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. VIG comes in at more than 200 basis points lower: 13.37%. Further below you’ll find the end result for the backtest I conducted with a $10,000 portfolio. VTI and VIG are issued by Vanguard. Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. When creating a balanced ETF portfolio industry sector analysis plays a vital role in making sure that we are not overexposing ourselves to one industry. I’m assuming you’re talking about your 401k (because the fund you’re talking about is probably a Vanguard fund and not a Fidelity fund.) On this blog, I share thoughts and ideas on Personal & Financial Freedom. However, in bull markets and in rising interest rate environment dividend funds generally tend to fare worse. So they’re not identical though their performance will be similar. Disclaimer:  While I love diving into investing-related data and playing around with backtests, I am in no way a certified expert. As a result, VIG is also less volatile than the entire stock market. SPY vs VTI ETF comparison analysis. The Vanguard S&P 500 ETF (VOO) is one of the most popular stock ETFs out there. This includes nearly every available company stock there is in the United States. Both funds, VOO and VTI have an expense ratio of 0.03%. Vanguard’s Total Market Fund encapsulates the entire market and includes more than 3,000 securities. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. A showdown between two classic funds: VTI vs. VIG. This ETF holds over 3,500 U.S. stocks across all cap sizes. Historical performance of VTI and VOO has been nearly identical. Analytical and entrepreneurial-minded data nerd, usability enthusiast, Boglehead, and Oxford comma advocate. However, VTI holds a much larger number of securities. But I’m not alone with my opinion: Vanguard has been the clear leader in investment products for many years past. Vanguard is by far my favorite asset management company. Historically, this bet would not have played out well. The sector distribution for VIG looks very different: tech companies only amount to 11% in VIG. Overall, both funds have performed very similarly: VTI has a compound annual growth rate (CAGR) of 8.64% over the past decade and VIG a CAGR of 8.51%. 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. A $10,000 portfolio invested in VTI would have resulted in $30,804. Please discuss all financial and investment decisions with a registered investment advisor (RIA). VOO is equivalent S&P 500. It remains a close call in the race for the highest returns between VTI vs. VIG. Sign up to receive email updates when a new post is published. A $10,000 portfolio invested in VIG would have resulted in $30,315. The biggest difference between VTI and VIG is the maximum drawdown. We will also examine the fund composition, i.e. Investors seeking lower volatility in stocks will want to go with VOO to solely hold large-caps via the S&P 500 index. It is only for retail investors. As you can already tell, the biggest difference is that the VT fund and the VTI fund is an international and American fund vs an only-American fund. Microsoft. This probably means Vanguard is doing a good job of emulating the U.S. economy with their VTI fund. On the low-end VTI is exposed to utilities, energy, and basic materials to a far lesser degree. The Vanguard Total Stock Market ETF (VTI) tracks the CRSP US Total Market Index. VIG lost far less value and recovered faster than VTI did. The reason for this is simple: smaller companies tend to focus their efforts on growing the company instead of paying out dividends to shareholders, or even doing so for ten consecutive years. Salesforce, Go to company page It is mandatory to procure user consent prior to running these cookies on your website. As such, VOO is entirely large-cap stocks, while VTI includes small- and mid-cap stocks. Instead, industrials come in at a hefty 24% of the fund’s equity. Read my lengthier disclaimer here. Expense ratio for these funds is the same at a low 0.03%. I lead the Paid Search marketing efforts at Gild Group. It is important to distinguish early between these two strategies or we might end up comparing apples to oranges. Otherwise, you can buy directly from Fidelity something close to VTI such as FSKAX, or their newer product FZROX. The Vanguard Dividend Appreciation ETF (VIG) tracks the NASDAQ US Dividend Achievers Select Index. Dividend funds such as VIG can make sense as another source of fixed income. Companies that increase their dividends over time tend to experience slower growth and tend to be more stable. So if they track an index that you want to invest in and they keep expenses low and don’t do anything shady, you’ll probably be good with any of them. And FZROX can’t be bought through brokeragelink from what I’ve heard. It was established in 2010. What is the Minimum Investment for Cardone Capital? Fidelity offers a new (as of 2016) index fund, the Vanguard Institutional S&P Index Tracker. On the flipside, VIG can protect your portfolio in bear markets. VTI is total stock market. Save my name, email, and website in this browser for the next time I comment. But FSKAX you probably could (but again, not sure it’s really necessary, Microsoft has low cost index funds that probably beat VTI and FSKAX overall.). You’ll do great with either one. We use cookies to ensure that we give you the best experience on our website. On the other hand, in the years following the market crash, VTI gained back everything it had lost and much more; and at a much faster rate than VIG.eval(ez_write_tag([[468,60],'mrmarvinallen_com-leader-1','ezslot_2',112,'0','0'])); The most recent years have been a mixed bag in terms of returns. Necessary cookies are absolutely essential for the website to function properly. Fidelity offers a new (as of 2016) index fund, the Vanguard Institutional S&P Index Tracker. We also use third-party cookies that help us analyze and understand how you use this website. Note that small- and mid-cap stocks have outperformed large-caps historically because they are considered riskier. Specifically, VTI is comprised of roughly 82% large-cap, 12% mid-cap, and 6% small-cap stocks. Beginners Start Here – 9 Steps to Start Building Wealth, What Is the Stock Market? VTI experienced a maximum drawdown of over -50% while VIG remained around -40%. The bigger question remains: should invest in dividend stocks or in growth stocks? Compare fees, performance, dividend yield, holdings, technical indicators, and many other metrics to make a better investment decision. With so many ETF options it’s hard to pick which is the best one or understand the differences. VOO tracks the S&P 500 Index. It appears almost identical to VTI. Your email address will not be published. This is equal to a CAGR of 8.64%. This category only includes cookies that ensures basic functionalities and security features of the website. Are you willing to take on more volatility for a potentially higher reward?eval(ez_write_tag([[336,280],'mrmarvinallen_com-banner-1','ezslot_0',110,'0','0'])); VTI has an annual volatility of 15.92%. This difference of more than 2% should fit your personal tolerance to see your portfolio’s value rise and fall substantially. VIG aims to provide investors with a stable and growing source of income through dividends. Taken as a group, this covers approximately 80 … VIG only holds around 200 companies whose dividend payouts have increased over the past decade.eval(ez_write_tag([[250,250],'mrmarvinallen_com-medrectangle-3','ezslot_10',107,'0','0']));eval(ez_write_tag([[250,250],'mrmarvinallen_com-medrectangle-3','ezslot_11',107,'0','1'])); VTI and VIG aim for very different goals and outcomes. Low cost index funds like Vanguards VOO and VTI are a great option for retirement accounts if they are available in your 401k or IRA. VTI simply gives investors exposure to the entire market. Owning larger companies in a fund is not necessarily a bad thing, it just means you will be less diversified regarding the depth of the stock market. The fund itself holds all the securities that are comprised by the index. VIG’s market capitalization is even heavier weighted towards large-cap companies at 85%. 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 can click here to read why Vanguard is the best. VTI vs. VOO: The Indexes. Also, consumer defensive goods play a much bigger role in VIG than in VTI. This confirms what we intuitively know about dividend stocks: they always fair better in bear markets.eval(ez_write_tag([[300,250],'mrmarvinallen_com-large-leaderboard-2','ezslot_14',111,'0','0'])); This becomes very visual when we look at the time period between 2008 and 2009 when the financial crisis hit. S&P 500 is top 500 companies. You can click here to read why Vanguard is the best. We’ll have a look at the annual returns first to get an idea of the frequency and ratio of net positive and negative years for both funds. In this comparison between two top Vanguard funds I will focus on the key difference between the funds, such as the expense ratio, index and holdings. This website uses cookies to improve your experience. Obviously they don’t have a history which could be concerning to some. The fund seeks to track the CRSP US Total Market Index. Past performance does not guarantee future returns. If you’re looking to approximate total market, you can also look for an extended market fund from Fidelity to augment your S&P 500 fund, and invest in roughly a 75/25 ratio. VTI: Vanguard Total Stock Market ETF. Keep in mind, that it is impossible to say whether this trend will continue or if VIG will be able to close the gap and even overtake VTI in returns. A large percentage of VTI is taken up by large-cap stocks. VOO has roughly 500 holdings and VTI has roughly 3,500 holdings. It is not intended to be investment advice.