Having trouble deciding between Vanguard’s VUG and VTI index funds? By the end of this, you might have a better idea of which ETF suits you best.
Your investment choices should ideally reflect your current portfolio. If you’re new to investing, consider starting with some highly-rated ETFs. Exchange-Traded Funds (ETFs) are popular among long-term investors for their potential returns and lower volatility. Plus, their dividend yields can significantly boost overall returns over time.
Let’s compare two popular ETFs from Vanguard: the Growth Index Fund (VUG) and the Total Stock Market Index Fund (VTI). We’ll explore their key features, differences, similarities, and performance.
VUG, launched by Vanguard in 2004, tracks the CRSP US Large Cap Growth Index. It holds around 267 stocks and aims to mirror the performance of the largest growth stocks in the U.S. With an expense ratio of 0.04%, VUG is a cost-effective option with about $82.51 billion in net assets. It’s known for its low fees and no minimum investment requirement, consistently outperforming the S&P 500 over the past decade.
On the other hand, VTI, established in 2001, tracks the CRSP US Total Market Index Fund. It includes around 4,033 holdings, covering a broad spectrum of U.S.-based public companies. VTI has an expense ratio of 0.03% and also requires no minimum initial investment. With $291 billion in assets under management, VTI offers extensive exposure to large, mid, and small-cap stocks across various sectors. This diversification helps minimize risk while aiming for solid returns.
Comparing the two, VTI is much more diversified with over 4,000 companies, while VUG focuses on just 267. The top ten companies in VTI make up about 23% of its portfolio, whereas in VUG, they constitute nearly 50%. This means VUG is less diversified and potentially more volatile.
Performance-wise, VUG has outperformed VTI by about 2% over the last ten years and by around 4.5% in the past five years. Both VUG and VTI have lower expense ratios and no minimum investment requirements, but VUG’s 0.04% fee is slightly higher than VTI’s 0.03%.
Ultimately, deciding between VUG and VTI depends on your investment goals. VUG offers higher potential returns but comes with more volatility due to its lower diversification. VTI, with its broader exposure, presents a more stable option with potentially lower returns.
Both ETFs are excellent choices from Vanguard, catering to different investment strategies. If you’re willing to accept higher volatility for greater returns, VUG might be the way to go. If you prefer a more diversified, lower-risk approach, VTI may be better suited for you.
In the end, the choice between VTI and VUG comes down to your personal investment preferences. Choose wisely!