VO vs VXF: Which One to Choose?

If you’re looking to invest in the stock market, exchange-traded funds (ETFs) are a great way to diversify your portfolio.

VO vs VXF: Two popular ETFs are Vanguard Mid-Cap ETF (VO) and Vanguard Extended Market ETF (VXF).

While both are offered by the same company, they have different investment strategies and fund compositions.

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VO is an ETF that tracks the performance of the CRSP US Mid Cap Index. This index includes companies with market capitalizations between $2 billion and $10 billion. On the other hand, VXF tracks the performance of the S&P Completion Index, which includes small and mid-cap stocks not included in the S&P 500. Understanding the differences between these two ETFs is important to make an informed investment decision.

When comparing VO and VXF, it’s important to consider various performance metrics, including expense ratio, AUM, and shares outstanding. Additionally, investors should consider financial considerations such as returns, volatility, and dividend yield. By analyzing these metrics, investors can determine which ETF is better suited for their investment strategy.

Understanding VO vs VXF

When it comes to investing in ETFs, it’s important to have a clear understanding of what you’re investing in. In this section, we’ll take a closer look at two popular Vanguard ETFs: VO and VXF.

VO: Vanguard Mid-Cap ETF

VO is an ETF that invests in mid-cap stocks, which are companies with a market capitalization between $2 billion and $10 billion. The fund aims to track the performance of the CRSP US Mid Cap Index, which includes approximately 350 mid-cap stocks.

One of the benefits of investing in VO is that it provides exposure to a diverse range of mid-cap companies. This can be a good option for investors who want to diversify their portfolio beyond large-cap stocks but don’t want to take on the risk associated with small-cap stocks.

VXF: Vanguard Extended Market ETF

VXF is an ETF that invests in small- and mid-cap stocks, which are companies with a market capitalization between $300 million and $10 billion. The fund aims to track the performance of the S&P Completion Index, which includes approximately 3,000 small- and mid-cap stocks.

One of the benefits of investing in VXF is that it provides exposure to a diverse range of small- and mid-cap companies. This can be a good option for investors who want to diversify their portfolio beyond large-cap stocks and mid-cap stocks but don’t want to take on the risk associated with small-cap stocks.

It’s important to note that investing in small- and mid-cap stocks can be riskier than investing in large-cap stocks. These companies are often less established and may be more volatile. However, they also have the potential for higher returns.

Overall, both VO and VXF can be good options for investors looking to diversify their portfolio beyond large-cap stocks. It’s important to consider your investment goals and risk tolerance before deciding which ETF is right for you.

Comparison of Performance Metrics VO vs VXF

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When comparing the Vanguard Mid-Cap ETF (VO) and the Vanguard Extended Market ETF (VXF), it’s important to look at various performance metrics to determine which one is better suited for your investment goals. Here, we’ll examine historical performance and returns as well as risk and volatility analysis to give you a better understanding of how these two ETFs compare.

Historical Performance and Returns

Historical performance and returns are important indicators of how well an ETF has performed in the past. Over the past five years, VO has had an average annual return of 16.18%, while VXF has had an average annual return of 16.28%. Over the past ten years, VO has had an average annual return of 13.32%, while VXF has had an average annual return of 13.09%.

Risk and Volatility Analysis VO vs VXF

Risk and volatility analysis are important factors to consider when investing in ETFs. The standard deviation is a measure of how much an ETF’s returns vary from its average return. The standard deviation for VO is 17.67%, while the standard deviation for VXF is 20.75%. This indicates that VXF is more volatile than VO.

The Sharpe ratio is a measure of an ETF’s risk-adjusted returns. The higher the Sharpe ratio, the better the ETF has performed relative to its risk. The Sharpe ratio for VO is 1.18, while the Sharpe ratio for VXF is 1.08. This indicates that VO has performed better relative to its risk than VXF.

In terms of alpha and beta, VO has an alpha of 0.08 and a beta of 1.02, while VXF has an alpha of 0.11 and a beta of 1.05. Alpha is a measure of an ETF’s excess return relative to its benchmark, while beta is a measure of an ETF’s volatility relative to its benchmark. These metrics indicate that VXF has slightly outperformed its benchmark, while VO has performed in line with its benchmark.

Overall, when comparing VO and VXF, it’s important to consider your investment goals and risk tolerance. VO has had slightly lower returns than VXF over the past five and ten years, but it has also been less volatile. Additionally, VO has a higher Sharpe ratio than VXF, indicating that it has performed better relative to its risk.

Investment Strategies and Fund Composition

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When it comes to investing in the stock market, diversification is key. By investing in a variety of different companies, you can spread your risk and potentially increase your returns. Both the Vanguard Mid-Cap ETF (VO) and the Vanguard Extended Market ETF (VXF) are designed to provide investors with exposure to a broad range of mid-cap and small-cap companies in the United States.

Diversification and Sector Exposure

VO invests primarily in mid-cap companies, which are generally considered to be companies with a market capitalization between $2 billion and $10 billion. On the other hand, VXF invests in small-cap companies, which are generally considered to be companies with a market capitalization between $300 million and $2 billion. By investing in both VO and VXF, you can gain exposure to a broad range of mid-cap and small-cap companies.

Both VO and VXF also provide investors with exposure to a variety of different sectors. VO has a slightly higher allocation to the technology sector, while VXF has a higher allocation to the industrials and real estate sectors. By investing in both VO and VXF, you can gain exposure to a broad range of sectors and potentially increase your diversification.

Top Holdings and Market Capitalization

When it comes to investing in ETFs, it’s important to pay attention to the top holdings and market capitalization of the underlying companies. VO’s top holdings include companies such as Square Inc., Twilio Inc., and Etsy Inc. VXF’s top holdings include companies such as Tesla Inc., Zoom Video Communications Inc., and Moderna Inc.

In terms of market capitalization, VO’s holdings are generally larger than VXF’s holdings. This is due to the fact that VO invests in mid-cap companies, which are generally larger than small-cap companies. By investing in both VO and VXF, you can gain exposure to a broad range of companies with varying market capitalizations.

Overall, both VO and VXF are excellent investment options for investors looking to gain exposure to a broad range of mid-cap and small-cap companies in the United States. By investing in both funds, you can potentially increase your diversification and potentially increase your returns over the long-term.

Financial Considerations

Expense Ratios and Dividend Yields

When comparing VO and VXF, expense ratios and dividend yields are important financial considerations. The expense ratio is the annual fee that an ETF charges its investors for managing the fund. VO has an expense ratio of 0.04%, which is lower than VXF’s expense ratio of 0.06% (source). This means that VO is a more cost-effective option for investors.

Dividend yield is the amount of dividends paid out by a company relative to its share price. VO has a higher dividend yield of 1.61% compared to VXF’s dividend yield of 1.42% (source). This means that VO provides a higher return on investment through dividends.

Valuation Metrics

Another financial consideration when comparing VO and VXF is valuation metrics. One common valuation metric is the price/earnings (P/E) ratio. The P/E ratio measures the price of a company’s stock relative to its earnings per share.

VO has a higher P/E ratio of 23.56 compared to VXF’s P/E ratio of 22.55 (source). This means that investors are paying more for each dollar of earnings with VO compared to VXF. However, it is important to note that a higher P/E ratio does not necessarily mean that a stock is overvalued.

In summary, when considering VO vs VXF, expense ratios and dividend yields are important factors to consider. VO has a lower expense ratio and a higher dividend yield compared to VXF. Additionally, when looking at valuation metrics, VO has a higher P/E ratio than VXF, indicating that investors are paying more for each dollar of earnings.

Investor Insights and Market Trends

Analyzing Market Movements

When analyzing the market movements of VO and VXF, it is important to take into account their assets under management (AUM) and average daily volume (ADV). As of December 9th, 2023, VO has an AUM of $105 billion and an ADV of 1.3 million shares, while VXF has an AUM of $67.4 billion and an ADV of 1.5 million shares. This indicates that VXF is slightly more liquid than VO, but both ETFs have a significant amount of assets under management.

Furthermore, past performance is not always indicative of future results, but it can provide valuable insights for investors. Over the past 10 years, VXF has yielded an average annual return of 10.72%, while VO has yielded an average annual return of 9.67%. This suggests that VXF has outperformed VO in terms of returns, but it is important to note that past performance does not guarantee future results.

Future Outlook and Predictions

Looking ahead, it is difficult to predict the future performance of VO and VXF with certainty. However, it is important to consider the current market trends and economic conditions. According to a recent Seeking Alpha article, VXF may be a better ETF strategy than VO due to its larger number of holdings and greater market value overlap. However, it is important to conduct your own research and analysis before making any investment decisions.

In addition, it is important to consider the issuer of each ETF. Both VO and VXF are issued by Vanguard, which is a reputable and well-established investment management company. This provides a level of confidence and stability for investors.

Overall, when considering investing in VO or VXF, it is important to analyze market movements, past performance, and future outlook, as well as conduct your own research and analysis to make an informed investment decision.

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