Vanguard has two ETFs that invest in the financial and commodity futures of agricultural commodities, energy, industrial metals, precious metals, grains and livestock. These funds are designed to provide investors with low fees while earning a high return on investment. The difference between these two funds is primarily due to their different investments objectives:
The Vanguard FTSE Emerging Markets ETF (NYSEARCA:VWO) invests mainly in stocks from emerging markets while the Vanguard FTSE Developed Markets Fund (NYSEMKT:VDYM) focuses on developed countries like Canada or Europe.,
Introduction ends

The “etf comparison tool” is a tool that allows users to compare two Vanguard ETFs. The tool will calculate the difference in performance and fees between the two funds.

A Comparison of Two Vanguard ETFs

VTI (Vanguard Total Stock Market ETF) and VOO (Vanguard S&P 500 Index ETF) are two of the most popular ETFs (exchange-traded funds) in the world. Each of these funds:

  • Is a tax-efficient investment
  • In comparison to their contemporaries, they have an extraordinarily low expenditure ratio.
  • Is it a better investment than active funds with comparable investment goals?

As a consequence, both of these stock ETFs are excellent long-term investment possibilities. They are particularly tempting to investors who are looking for low-cost investments.

Both funds will be thoroughly examined in this paper. We’ll go through the following aspects of each fund:

  • Investing priority
  • Performance in comparison
  • Investment holdings & size
  • Turnover & tax impact in an investment portfolio

We’ll also guide you in the right direction for where an ordinary investor may buy these funds, as well as what to look out for while setting up your investing accounts.

Let’s begin by discussing one of the major differences between these two index funds: Investing priority.

VTI’s Investing priority

VTI is an index fund that aims to follow (rather than outperform) the CRSP U.S. Total Market Index. VTI is an index fund, which means it buys exactly the same amount of every publicly listed company in the US stock market.

What is the CRSP Total Market Index for the United States?

The Center for Research in Security Prices, a renowned worldwide leader in research-quality historical market data and returns, produced the CRSP US Total Market Index. The CRSP’s depiction of the whole US stock market, including mega-cap, large-cap, mid-cap, and small-cap businesses, is the US Total Market Index.

The CRSP US Total Market Index contained 4,092 businesses as of the quarter ended March 31, 2022, representing roughly $45.3 trillion in market value.

VTI holds individual equities in about 4,070 publicly listed U.S. firms as of February 28, 2022.

VOO’s Investing priority

Like VTI, VOO is an index fund. However, instead of tracking the broader U.S. stock market, VOO’s investment objective is to track the Standard & Poor’s 500 Index. Similarly, VOO purchases identically equal amounts of individual stocks in its index.

In VOO’s case, that would be the S&P 500 Index.

What is the S&P 500 Index?

The S&P 500 is one of the world’s oldest stock indices, and arguably one of the most famous. Created by Standard and Poor’s in 1957, the S&P 500 Index represents the 500 largest publicly traded U.S. companies.

As of the quarter ending 3/31/2022, the S&P 500 Index had 505 U.S. companies representing approximately $40.3 trillion in market capitalization.

VOO owned individual stocks in 507 publicly listed U.S. firms as of February 28, 2022.

The difference in Investing priority

It’s impossible to choose between VOO and VTI as the best ETF without considering portfolio design components. In portfolio creation, each fund serves a particular role.

Going strictly by the numbers, it appears that the S&P 500 represents about 12% of the total companies in the CRSP US Total Market Index. But the S&P 500 companies comprise almost 90% of the total market capitalization of the entire U.S. equity market.

VOO might be appealing to an investor who believes they have adequate small-cap exposure. VOO may be chosen by that investor to concentrate on large-cap equities with some exposure to mid-cap firms at the index’s lower end.

VTI, on the other hand, would appeal to a portfolio diversification investor. That investor is most likely interested in investing in tiny caps. While there is some exposure to smaller businesses, the CRSP is still skewed toward the biggest.

Let us take a closer look at the possessions.

Comparing Holdings

While the holdings of each of these funds are substantially the same, we should investigate them more. Let’s take a deeper look at each ETF’s Top ten investments.

The Top Ten Holdings of VTI

The Top Ten Holdings of VTI represent almost 25% of its entire market cap. As outlined in the picture below, the largest holdings are primarily from the technology sector.

However, Warren Buffett’s Berkshire Hathaway is in the top ten of the VTI ETF, as well as two health sector companies, United Health Group and Johnson & Johnson.

VTI's 10 largest stock holdings include: Apple Inc. Microsoft Corp. Alphabet Inc. Amazon Inc. Tesla, Inc. NVIDIA Corp. Berkshire Hathaway Inc. Meta Platforms Inc. United Health Group Inc. Johnson & JohnsonThe Top Ten Holdings of VTI as of 02/28/2022 (Vanguard website)

Because the top 10 firms account for around 25% of VTI’s total interests, the remaining 75% is divided among 4,050 smaller companies.

The Top Ten Holdings of VOO

Like VTI, tech companies dominate The Top Ten Holdings of VOO. In fact, this top ten list is identical to VTI’s top ten. The only difference is that VOO’s top ten comprises almost 30% of its top ten, compared to VTI’s 24.7%.

VOO's 10 largest stock holdings include: Apple Inc. Microsoft Corp. Alphabet Inc. Amazon Inc. Tesla, Inc. NVIDIA Corp. Berkshire Hathaway Inc. Meta Platforms Inc. United Health Group Inc. Johnson & JohnsonThe Top Ten Holdings of VOO as of 02/28/2022 (Vanguard website)

The biggest difference between the two is that VOO’s remaining 70% is allocated to the 490 or so remaining S&P 500 companies, instead of 4,000. The following chart shows the comparison again, side-by-side.

Fund Top ten investments The remaining number of businesses Companies that remain ( percent )
VOO 29.50% 495 69.50%
VTI 24.70% 4,082 75.30%

VTI and VOO’s largest holdings as a proportion of total net assets are compared side by side.

Let’s take a look at each fund’s total holdings, broken down by sector. To make it simpler to understand, each fund’s holdings are represented by a pie chart from its appropriate index.

VTI Holdings in General

Technology, consumer goods, financials, and health care lead the CRSP Total US Stock Market Index.Companies in the CRSP Total US Stock Market, broken down by sector

As you can see, technology businesses account for little over a quarter of the CRSP, with consumer discretionary goods (15.27 percent), health care (12.86 percent), and industrials following closely behind (12.65 percent ).

Their holdings are fairly similar since Vanguard’s Total Stock Market ETF closely monitors the CRSP.

VOO Holdings in General

The S&P 500 is led by information technology, then health care, consumer discretionary goods, and the financial industry.Breakdown of the S&P 500 companies, by sector

In the S&P 500, the tech sector reigns supreme (28% of holdings), followed by health care (13.6%), consumer discretionary goods (12%), and financials (11%).

There is a little variation, but it is basically comparable to the whole US stock market.

Comparing Holdings

Although VTI provides slightly more diversification than VOO, it’s simply because the CRSP Total US Stock Index includes small cap companies. The S&P 500 focuses mostly on large cap companies.

Value vs. growth stocks

Each fund is a passive index fund. As a result, neither fund tries to achieve a slant towards growth or value. But because the S&P 500 and CRSP Total US Stock Market are both market cap indices, you might find that these funds tilt slightly more towards large-cap growth rather than value stocks.

Let’s take a look at the overall assets managed (AUM).

Comparison of AUM

Vanguard index funds are among the most well-known in the world. Whether you’re talking about mutual funds or ETFs, their cheap costs make them very appealing to novice investors.

VTI and VOO are two of Vanguard’s biggest ETFs, since they follow two of the most popular stock indexes. According to Vanguard’s website, determining the exact size of an ETF is challenging.

VTI

VTI weighs in at about $1.3 trillion in AUM. However, this also includes the Vanguard S&P 500 mutual fund, VFIAX.

VOO

VOO is slightly a slightly smaller fund, at $808 billion, including Vanguard’s flagship S&P 500 mutual fund, VTSAX.

Holdings of ETFs

However, based on Vanguard’s website, VTI and VOO are more comparable in size than you may think. According to ETF Database, which keeps track of the top 100 ETFs by assets managed, each has the following asset breakdown:

  • $287.3 billion in VTI
  • $286.6 billion in VOO

This places them as the world’s #3 and #4 largest ETFs by size. The only funds ranked ahead of VTI and VOO are both S&P 500 index funds:

  • SPDR S&P 500 Index (SPY): $410.1 billion
  • iShares Core S&P 500 Index (IVV): $331.3 billion

Let’s look at the performance of each fund, both compared to its benchmark index and in absolute terms.

Comparison of results

Before we dive in, both VTI and VOO are passive index funds. Their goal is to track the returns for their respective indices. But these returns will always differ based on two factors: management fees & taxes.

Ratios of expenses

Also known as management fees, Ratios of expenses are taken from the investment (in both cases, Vanguard) to cover the operating costs of the fund. Usually, Ratios of expenses are reflected by an adjustment to the end of day share price.

An index fund has the benefit of not having to pay for an active fund manager, investment analysts, or other employees to oversee the investments. Many investors choose index funds because of their inexpensive costs.

VTI and VOO both have a 0.03 percent expenditure ratio. Vanguard will take $3 per year for every $10,000 invested. In contrast, most financial advisers consider a fund to be reasonably priced if its cost ratio is less than 1% per year.

These Ratios of expenses are in line with iShares (also 0.03%), and well below SPY (at 0.09%).

Tax drag

Mutual funds and exchange-traded funds (ETFs) do engage in taxable events. Harvesting capital gains or getting dividends from the underlying firms are examples of taxable occurrences.

Because the corporations do not pay taxes on these occurrences, it is difficult to see how taxes affect yearly profits. The investor is informed about these transactions.

Dividends

It’s difficult to observe in most investing accounts. However, you’ll most likely see quarterly dividend transactions for each mutual fund or ETF in your investment portfolio every quarter.

You should expect a low payment if your fund has a low percentage of dividend-paying companies. Dividends are taxed in taxable investment accounts, though. This might be qualified dividends (which are taxed at capital gains rates), ordinary dividends (which are taxed at regular income tax rates), or a mix of both.

Distributions of capital gains

And at the end of the year (usually towards the end of December), you’ll see Distributions of capital gains in each of your funds. The amount of distributions depends on the amount of activity in your fund.

If your fund has high turnover, you’ll likely be subject to a lot of Distributions of capital gains. High turnover means an active fund manager is consistently buying and selling underlying securities within the fund. Those capital gains are required to be passed on to the fundholder (that is you).

Index funds, on the other hand, see very little turnover. Each of these indicators is recalculated every year. The funds are also rebalanced on a quarterly basis. As a result, there isn’t much buying and selling going on. As a result, your performance will be less affected.

Taxes have no effect on the performance of your investment. However, tax efficiency should be taken into account when evaluating your total investment success.

Let’s take a look at the Performance in comparison of each fund (minus management fees), compared to its underlying index.

CRSP Index vs. VTI

Here’s how VTI’s yearly investment performance has changed during the last year, three years, five years, a decade, and throughout its history:

  • 11.67 percent after one year
  • 18.14 percent over three years
  • 15.36 percent after five years
  • 14.24 percent after ten years
  • 8.63 percent since inception

Based on its cost ratio drag, VTI’s performance lags somewhat behind its target index.

VTI’s average yearly investment performance since 2001 has been 8.63 percent. ‘Spliced entire stock market index,’ you’ll note. This merely reflects the fact that from its start, VTI has tracked three distinct stock market indices:

  • Until 2005, the Dow Jones U.S. Total Stock Market Index (previously the Wilshire 5000)
  • US Broad Market Index (MSCI) (from 2005 until 2013)
  • US Total Market Index CRSP (since 2013)

All three indexes represent the complete stock market in the United States.

Vanguard's Total Stock Market ETF (VTI) tracks the CRSP Total US Stock Market Index, representing similar performance over the past year, 3 years, 5 years, 10 years, and since inception (2010).VTI’s and the US Stock Market’s annual performance (Vanguard website)

VOO vs. S&P 500 Index

Here’s how VOO’s yearly investment performance has changed during the last year, three years, five years, and throughout its history:

  • 15.59 percent after one year
  • 18.88 percent after three years
  • 15.95 percent after 5 years
  • 14.60 percent on a ten-year basis
  • 15.33 percent since inception

Similarly, VOO’s performance slightly trails the S&P 500 Index, with Ratios of expenses presenting the primary difference.

Vanguard's S&P 500 ETF (VOO) tracks the S&P 500 Index, representing similar performance over the past year, 3 years, 5 years, 10 years, and since inception (2010).Annual performance of VOO and the S&P 500 Index (Vanguard website)

Since both VOO and VTI are ETFs, it’s important to note that Vanguard also offers mutual funds that track both the S&P 500 Index and the performance of the CRSP US Total Stock Market Index.

Without mentioning some of the benefits of ETFs over mutual funds, this review would be inadequate.

ETFs have a number of advantages over mutual funds.

Despite their similarities, ETFs and mutual funds have numerous major distinctions.

Minimum financial commitment

According to Vanguard, there is a $3,000 Minimum financial commitment to invest in its Admiral fund tracking either the S&P 500 (VFIAX) or the total US stock market (VTSAX).

There are usually no Minimum financial commitments to purchase an ETF (other than being able to buy a complete share).

Availability

Both sorts of funding are often thought to be extensively accessible. Mutual funds, on the other hand, are more commonly accessible to investors who do not have brokerage accounts since they are provided in employer-sponsored retirement plans (such as 401k or 403b plans).

If you’re dollar-cost averaging, you may buy fractional shares of a mutual fund. Unless you go to a specialised brokerage business like M1 Finance, this is often not accessible for ETFs.

Execution of trades

Conversely, ETFs are more widely available during the trading day, since they are traded like stocks. Mutual fund transactions do not get processed until the end of the trading day. This can have an impact on pricing and Execution of trades, particularly during stock market volatility.

This isn’t a problem the overwhelming majority of the time. However, trade was so erratic during the coronavirus pandemic that stock exchanges shut down many times in March and April 2020. There were also numerous days with large dips.

For a long-term investor, Execution of trades should not matter.

Costs of transactions

Many online brokerages have eliminated or charged minimal transaction costs for ETFs. Brokerages, on the other hand, often impose transaction fees for mutual funds that are not issued by the brokerage.

Vanguard, for example, will handle any Vanguard mutual fund transaction for free. For each Vanguard mutual fund transaction, however, Schwab imposes a $49 transaction fee. However, trading VTI and VOO with Schwab is free.

Where You Can Purchase VTI & VOO

VTI and VOO may be purchased via practically any online brokerage business or your financial adviser.

An ETF is a type of investment that tracks the performance of an index. The two Vanguard ETFs are VTI and VEA. Reference: compare etfs.

  • fund comparison tool
  • compare mutual funds
  • morningstar etf comparison
  • compare funds
  • vanguard funds performance
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