VTI vs VOO: Which ETF Is a Better Bet on America’s Growth?

Investing in America has long been a winning strategy, as evidenced by the success of legendary investor Warren Buffett. He has consistently warned investors against betting against the U.S. economy, and his belief in the nation’s potential has paid off through the success of companies like Berkshire Hathaway. Similarly, major American firms like Apple, Microsoft, and Nvidia have reached trillion-dollar valuations, solidifying the country’s dominance in global markets.

For individual investors, there are several ways to ride the wave of America’s growth. Two of the most popular exchange-traded funds (ETFs) to do so are the Vanguard Total Stock Market ETF (VTI) and the Vanguard S&P 500 ETF (VOO). Both offer exposure to U.S. stocks but differ in their scope and composition. Let’s take a closer look at these two ETFs and determine which one might be the better option for investors.

Overview of VTI and VOO

The Vanguard Total Stock Market ETF (VTI) and the Vanguard S&P 500 ETF (VOO) are two of the largest ETFs in the market. Both are low-cost funds that allow investors to gain broad exposure to the U.S. stock market.

Both ETFs come with an expense ratio of 0.03%, making them some of the cheapest options for investors. However, they differ in terms of the number of companies they track, their sector composition, and their overall investment strategy.

Vanguard Total Stock Market ETF (VTI)

The Vanguard Total Stock Market ETF (VTI) is a broad-market fund that tracks the CRSP US Total Market Index, offering exposure to 3,654 companies across different sectors and market capitalizations. It provides a comprehensive representation of the U.S. stock market, including large-cap, mid-cap, small-cap, and micro-cap stocks.

 Key Features of VTI:

Diverse Coverage: The fund holds stocks from all sectors of the U.S. economy, giving it a broader reach compared to the S&P 500-focused VOO. 

Top Sector Weights: Technology, with a 33.45% stake, is the largest sector in the ETF, followed by consumer discretionary, industrials, healthcare, and financials.

Top Holdings: Like VOO, VTI’s top holdings include tech giants like Apple, Microsoft, Amazon, Nvidia, and Alphabet. In fact, the top 10 holdings account for 29% of the fund.

Performance: VTI’s five-year return is 104.46%, and its return in 2023 was 22.5%, offering solid long-term performance. 

VTI’s broad scope makes it an ideal option for investors who want exposure to the entire U.S. market, including both large-cap blue-chip companies and smaller, fast-growing firms.

Vanguard S&P 500 ETF (VOO)

The Vanguard S&P 500 ETF (VOO) is more focused in comparison. It tracks the S&P 500 Index, which includes the 500 largest publicly traded companies in the U.S. As such, it emphasizes large-cap stocks that dominate the U.S. economy.

 Key Features of VOO:

Large-Cap Focus: VOO focuses solely on the largest American companies, offering exposure to the dominant players in the market.

Top Sector Weights: Like VTI, VOO’s largest sector allocation is technology (31.67%), followed by financials, healthcare, consumer discretionary, and communication services.

Top Holdings: The biggest names in the fund are familiar — Apple, Microsoft, Nvidia, Amazon, Meta Platforms, and Alphabet. The top 10 holdings make up 34% of the entire fund, slightly more concentrated than VTI.

Performance: VOO’s five-year return is 110%, slightly outperforming VTI over the same period. Its return in 2023 was 23.7%, indicating a strong performance during the year.

VOO is a strong option for investors who want a more focused exposure to the largest and most influential companies in the U.S.

VTI vs VOO: Performance Comparison

Timeframe	VTI Return	VOO Return
5-Year Return	104.46%	110%
2023 YTD Return	22.5%	23.7%
Average Annual Return	8.8%	9.1%

While the returns of VTI and VOO are highly correlated due to their similar holdings, VOO has slightly outperformed VTI over the past five years. This is largely because VOO’s focus on large-cap stocks means that it benefits more directly from the growth of mega-cap tech companies like Apple, Microsoft, and Nvidia.

 Which ETF Is Better for Investors?

The decision between VTI and VOO ultimately comes down to an investor’s goals and risk tolerance. Here are some considerations for both funds:

VTI is ideal for investors who want exposure to the entire U.S. stock market, including small and mid-sized companies that have higher growth potential but may be more volatile. It’s a more comprehensive bet on America as it includes over 3,600 stocks from all sectors and market caps.

VOO, on the other hand, is a better choice for those who want concentrated exposure to the largest and most stable U.S. companies. With its focus on the top 500 companies, VOO provides investors with a less volatile option compared to VTI.

Both VTI and VOO are excellent choices for investors looking to invest in America’s growth. They offer low-cost exposure to the U.S. stock market and have delivered strong returns over time. However, VOO may be slightly better for investors who prefer more focused exposure to large-cap stocks, while VTI offers more diversification by including smaller companies. Whichever you choose, both ETFs are solid bets for long-term growth, reflecting the resilience and innovation of the U.S. economy.