VTI vs VO: Comprehensive Comparison

If you’re looking to invest in the stock market, ETFs can be a great way to get started.

Two popular options are VTI vs VO. VTI is the Vanguard Total Stock Market ETF, while VO is the Vanguard Mid-Cap ETF.

Both offer investors exposure to a diverse range of sectors in the financial market, but there are some key differences to consider before making a decision.

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VTI tracks the CRSP US Total Market Index, which includes all the stocks in the S&P 500 plus over 3,500 additional stocks. This represents the entire US stock market, making it a great option for investors looking for broad exposure. On the other hand, VO tracks the CRSP US Mid Cap Index, which includes mid-cap stocks, or companies with market capitalizations between $2 billion and $10 billion. This means that VO may be a better option for investors looking for more targeted exposure to mid-sized companies.

When deciding between VTI and VO, it’s important to consider your investment goals and risk tolerance. Both ETFs have their pros and cons, and the best option for you will depend on your individual needs. In the following sections, we’ll take a closer look at the comparative analysis and performance metrics of these ETFs, as well as some investment strategies and investor considerations to keep in mind.

Key Takeaways VTI vs VO

  • VTI tracks the CRSP US Total Market Index, while VO tracks the CRSP US Mid Cap Index.
  • VTI may be a better option for investors looking for broad exposure to the entire US stock market, while VO may be a better option for investors looking for more targeted exposure to mid-sized companies.
  • When deciding between VTI and VO, it’s important to consider your investment goals and risk tolerance.

Understanding VTI vs VO

Fund Objectives

When it comes to investing in the stock market, there are many options available to you. Two popular options are the Vanguard Total Stock Market ETF (VTI) and the Vanguard S&P 500 ETF (VO). Both VTI and VO are exchange-traded funds (ETFs) that provide investors with exposure to the U.S. stock market.

VTI aims to track the performance of the CRSP US Total Market Index, which includes all the stocks in the U.S. equity market. This means that VTI provides investors with exposure to the entire U.S. stock market, including small, mid, and large-cap stocks. On the other hand, VO aims to track the performance of the S&P 500 Index, which includes only the 500 largest U.S. companies by market capitalization.

Key Features

One of the key features of VTI is that it provides investors with exposure to the entire U.S. stock market. This means that VTI is a more diversified investment than VO, which only provides exposure to the largest U.S. companies. Additionally, VTI has a lower expense ratio than VO, which means that investors pay less in fees to invest in VTI.

Another key feature of VO is that it provides investors with exposure to the largest U.S. companies, which are often considered to be more stable and less risky than smaller companies. Additionally, VO has a higher dividend yield than VTI, which means that investors may receive more income from their investment in VO.

Issuer Information

Both VTI and VO are issued by Vanguard, which is one of the largest investment management companies in the world. Vanguard was founded in 1975 and has since grown to manage over $7 trillion in assets. Vanguard is known for its low-cost index funds and ETFs, which are designed to provide investors with broad market exposure at a low cost.

In summary, VTI and VO are both popular ETFs that provide investors with exposure to the U.S. stock market. VTI provides investors with exposure to the entire U.S. stock market, while VO provides exposure to only the largest U.S. companies. Both ETFs are issued by Vanguard, which is known for its low-cost index funds and ETFs.

Comparative Analysis VTI vs VO

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When comparing VTI vs VO, there are several key factors to consider. In this section, we will analyze the differences between these two ETFs, focusing on their expense ratios, market capitalization, sector allocation, and top holdings.

Expense Ratios

One of the most significant differences between VTI and VO is their expense ratios. VTI has a lower expense ratio of 0.03%, while VO has an expense ratio of 0.04%. This means that VTI is slightly cheaper to own than VO.

Market Capitalization

Another key difference between VTI and VO is their market capitalization. VTI is a large-cap ETF, while VO is a mid-cap ETF. This means that VTI invests in larger, more established companies, while VO invests in smaller, growing companies. If you’re looking for exposure to larger, more established companies, VTI may be the better choice. If you’re looking for exposure to smaller, growing companies, VO may be the better choice.

Sector Allocation

VTI and VO also differ in their sector allocation. VTI has a more diversified sector allocation, with its largest allocations in technology, healthcare, and financials. VO, on the other hand, has a larger allocation to industrials and a smaller allocation to technology. If you’re looking for exposure to a more diversified range of sectors, VTI may be the better choice. If you’re looking for exposure to industrials, VO may be the better choice.

Top Holdings Comparison

Finally, VTI and VO differ in their top holdings. VTI’s top holdings include Apple, Microsoft, Amazon, and Nvidia, while VO’s top holdings include Alphabet, Tesla, Berkshire Hathaway, and UnitedHealth. If you’re looking for exposure to some of the largest and most well-known companies in the world, VTI may be the better choice. If you’re looking for exposure to some of the most innovative and growing companies, VO may be the better choice.

Overall, when comparing VTI vs VO, it’s important to consider your investment goals and risk tolerance. Both ETFs offer exposure to different segments of the market, and each has its own strengths and weaknesses. By understanding the differences between these two ETFs, you can make an informed decision about which one is right for you.

Performance Metrics

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When comparing VTI vs VO, it’s important to consider their historical returns, dividend yields, and volatility and risk.

Historical Returns

Both VTI and VO have performed well historically, with average annual returns of 12.07% and 12.54% respectively over the past 10 years 12. While VOO has a slightly higher average annual return rate of 12.61% 1, VTI and VO have still provided strong returns for investors.

Dividend Yields

When it comes to dividend yields, VTI and VO are fairly similar. VTI has a dividend yield of 1.57%, while VO has a slightly lower yield of 1.13% 23. While VTI has a higher yield, both funds offer investors a decent source of income.

Volatility and Risk

One way to measure volatility and risk is through the Sharpe ratio, which takes into account a fund’s return and risk level. VTI has a Sharpe ratio of 1.18, while VO has a slightly lower ratio of 1.03 43. This means that VTI has provided higher returns relative to its risk level compared to VO.

Overall, when considering performance metrics, both VTI and VO have provided strong historical returns and decent dividend yields. While VTI has a slightly higher average annual return rate and a higher dividend yield, VO has a lower Sharpe ratio, indicating slightly higher risk. Ultimately, the decision between VTI and VO will depend on your investment goals and risk tolerance.

Investment Strategies

When comparing VTI and VO, it’s important to understand the investment strategies of these two ETFs. Here are some key considerations to keep in mind:

Portfolio Diversification

One of the primary benefits of investing in ETFs is portfolio diversification. Both VTI and VO offer exposure to a wide range of companies across different sectors, which can help mitigate risk and potentially improve returns. However, it’s important to note that VTI offers exposure to the entire U.S. stock market, while VO focuses specifically on mid-cap stocks.

If you’re looking for broader exposure to the market, VTI may be a better choice. On the other hand, if you’re interested in investing in mid-cap stocks specifically, VO may be a better fit for your portfolio.

Long-Term vs Short-Term Holding

Another important consideration is your investment time horizon. If you’re a long-term investor, both VTI and VO can be good choices. Over the long term, the stock market tends to offer higher returns than other types of investments, such as bonds or cash.

However, if you’re a short-term investor, you may want to be more cautious. The stock market can be volatile in the short term, and there’s always the risk of losing money. If you’re planning to hold your investments for less than a year, you may want to consider a more conservative investment strategy.

When making investment decisions, it’s important to consider your own financial goals and risk tolerance. By understanding the investment strategies of VTI and VO, you can make an informed decision about which ETF is right for you.

Investor Considerations

When comparing VTI and VO, there are several factors to consider before making an investment decision. In this section, we will discuss some of the investor considerations that can help you determine which ETF is the better choice for you.

Investment Horizon

Your investment horizon is the length of time you plan to hold your investment. If you have a long-term investment horizon, VTI may be a better option for you. VTI offers exposure to the entire U.S. stock market, which means it has a broader market exposure and can provide greater stability over time. On the other hand, if you have a shorter investment horizon, VO may be a better choice. VO focuses on mid-cap stocks, which have the potential for greater growth in the short term but can be more volatile.

Risk Tolerance

Your risk tolerance is a measure of your willingness to take on risk in your investments. If you have a high risk tolerance, VTI may be a better option for you. VTI has a larger pool of stocks, which can help reduce investor risk. However, if you have a lower risk tolerance, VO may be a better choice. VO focuses on mid-cap stocks, which can be more volatile but also have the potential for greater growth.

Investment Goals

Your investment goals are the reasons why you are investing in the first place. If your goal is to achieve long-term growth potential, VTI may be a better option for you. VTI has exposure to the entire U.S. stock market, which means it has the potential for greater long-term growth. However, if your goal is to achieve short-term growth potential, VO may be a better choice. VO focuses on mid-cap stocks, which have the potential for greater short-term growth but can be more volatile.

Overall, when choosing between VTI and VO, it is important to consider your investment horizon, risk tolerance, and investment goals. By taking these factors into account, you can make a more informed investment decision that aligns with your financial goals and needs.

Footnotes

  1. Forbes Advisor 2
  2. Money Main St. 2
  3. ETF.com 2
  4. ETF Database

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