VTI vs. VOO: Which ETF Should You Buy?

Exchange-traded funds (ETFs) allow you to invest in many companies at once and can be purchased through online brokers. VTI and VOO — two ETFs offered by Vanguard — can help you diversify your portfolio with minimal effort.

But not all ETFs are the same. Some, like VTI, allow you to invest in the entire U.S. stock market. Meanwhile, other ETFs invest in just a handful of companies.

We’ll compare VTI, which invests in every publicly traded company, to VOO, which only invests in the S&P 500. Neither fund is necessarily better than the other, but they may lend themselves better to different overall portfolio strategies.

VTI vs. VOO

If you’re just learning how to invest money, you may not be familiar with the differences between VTI and VOO. We’ll break those down here.

When to go with Vanguard Total Stock Market ETF (VTI)

The Vanguard Total Stock Market ETF (VTI) is an ETF that aims to track the performance of the CRSP US Total Stock Market Index. This stock index represents nearly 4,000 companies, which is approximately 100% of the entire U.S. stock market, including micro-, small-, mid-, and large-cap stocks.

Here are a few situations where VTI might be the better ETF option for you:

• You want the most amount of diversification
• You want a lower entry price

Broad market diversification

One of the most obvious differences between VTI and VOO is the indexes they track. VTI aims to track the performance of the CRSP US Total Market Index, while VOO attempts to track the performance of the S&P 500.

With both funds, a large percentage of your money is invested in big names like Apple, Microsoft, and Amazon. But because they track different indexes, VTI has thousands more stock holdings than VOO.

Given its broad diversification, VTI may be a better option for investors who want to invest in just one U.S. stock market ETF. Because VTI covers the entire U.S. stock market, you have exposure to all market capitalization levels and don’t necessarily need to add any other stock funds. While VOO is still quite diversified, it doesn’t offer exposure to small- and mid-cap stocks.

As an investor, I opt for total stock market funds over S&P 500 funds, simply due to the ease of not having to invest in multiple U.S. stock funds. If simplicity is your goal, VTI could be the right choice.

Lower share price

VTI trades at a considerably lower trading price than VOO — $280.58 per share compared to $522.74, as of October 2, 2024. This likely makes it far more accessible for investors. You would need nearly double the amount of money to buy a share of VOO.

ETFs are priced like stocks rather than mutual funds. When you invest in the fund, you’re buying a certain number of shares at the current market per share price. The higher the share price, the fewer number of shares you can buy with the same amount of money.

It’s worth noting that the significant difference in share prices doesn’t necessarily mean VOO is a better ETF. Though it has incrementally higher returns, which we’ll talk about later, you aren’t necessarily getting double the value for double the price.

When to go with Vanguard S&P 500 ETF (VOO)

The Vanguard S&P 500 ETF (VOO) is an ETF that aims to track the performance of the S&P 500 Index. The S&P 500 is considered the best single gauge of large-cap companies — approximately 500 companies at any given time.

Together, these 500 companies are worth around $15.6 trillion. The S&P 500 represents less than 15% of the roughly 4,000 publicly traded companies in the U.S. Nevertheless, those 500 companies account for about 80% of the value of all stocks available on the market.

There are a few reasons why VOO might be a more attractive option for you:

• You plan to invest in other ETFs
• You want higher long-term returns

One part of a larger ETF strategy

VOO could be a good option for you if you want to invest in multiple different stock funds to cover all your bases. For example, maybe you invest in VOO for large-cap exposure, but then invest in small- and mid-cap funds in one or more other funds.

This strategy gives you a bit more control over your portfolio allocation. You get to decide what percentage of your portfolio goes to large-cap versus small-cap stocks rather than letting Vanguard decide for you.

That’s not to say you have to further diversify your stock holdings if you invest in VOO. There are plenty of people who invest in VOO and call it a day. However, if you want a well-diversified stock portfolio with different market caps, you likely would want to incorporate other stock funds along with VOO.

High long-term returns

VTI and VOO have similar historical performances across the board, especially when we look at their 3-year, 5-year, and 10-year performance. However, there are slight differences in returns.

For example, consider the historical performance of VTI vs. VOO:

These small differences won’t be very noticeable for a beginner who has only a few thousand dollars to invest. But for someone with hundreds of thousands, or even millions, to invest, the difference would be much more noticeable.

For example, consider two scenarios:

• In scenario A, an investor has $10,000 to invest
• In scenario B, an investor has $1,000,000 to invest.

Here is how these scenarios compare when using VTI’s 12.78% 10-year return and VOO’s 13.33% 10-year return:

Calculated using the SEC compound interest calculator.

These price differences could be explained by the fact that VOO holds solely large-cap stocks. It’s not necessarily the case that large-cap stocks have higher returns across the board. However, they do tend to provide more stable and consistent returns. Small-cap stocks, on the other hand, may have more volatility. The small-cap exposure in VTI could help to explain its slightly lower long-term returns.

What both VTI and VOO excel at

While VTI and VOO have some important differences, there are a few things both funds do very well, making them a good option for many investors:

• Low fees: Both ETFs have an expense ratio of 0.03%. For example, you would pay a fee of just $3 per year on $10,000 invested in either ETF.
• Strong performance: Both VTI and VOO have performed well in the past. For instance, VTI has a 10-year average annual return of 12.78%, while VOO’s 10-year average annual return rate is 13.33%.
• Good for beginners: Both ETFs are index funds, which means little work is needed from the investor. To invest in multiple companies, you only have to buy shares of the fund. There is no research to do beyond understanding the purpose of each fund.
• Diversification: Both VTI and VOO are well diversified, so you aren’t putting all your eggs in one basket. VTI naturally provides more diversification since it invests in the entire U.S. stock market. However, both of these ETFs invest in 11 sectors. Many investors choose one of these funds as their entire U.S. stock market exposure.

Which ETF should you choose?

Both VTI and VOO are excellent low-cost ETFs that can work well for beginners and experienced investors alike. They have the same 0.03% expense ratio, meaning neither fund is likely to eat away at your returns, and the long-term performance for these funds has historically been similar.

VTI is a better choice if diversification is your priority since it invests in nearly every publicly traded company in the U.S. VOO, meanwhile, invests in about 500 of the largest companies. VTI also has a much lower trading price, which could make it more accessible.

On the other hand, VOO may be a better option if you want the strongest long-term returns. Though there’s not a significant difference, VOO does have an edge over VTI. And while the fact that it's less diversified might be a downside for some investors, others might prefer it so they can customize their portfolio themselves.

FAQs

Bottom line

VTI and VTO are both low-cost, diversified ETFs with strong performance. While VTI aims to track the performance of the entire U.S. stock market, VOO tracks just the stocks in the S&P 500, limiting it to large-cap stocks.

Of course, VTI and VOO are just two of the funds available on the market. There are literally thousands of ETFs and mutual funds on the market. You may decide to opt for the mutual fund versions of Vanguard’s total stock market and S&P 500 funds — VTSAX and VFIAX, respectively.

You may also decide to take a different approach altogether. Ultimately, it’s important to build an investment portfolio that fits your financial goals and risk tolerance.

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