The S&P 500 or the Whole US Market? How Vanguard’s Two Core Funds Compare

VOO and VTI are both low-cost Vanguard ETFs with the same 0.03% expense ratio, but they own different slices of the US stock market. VOO holds the roughly 500 large companies in the S&P 500, while VTI holds the entire US stock market, more than 3,000 companies of every size, from the largest technology giants down to small and mid-sized businesses.

Because the 500 largest companies make up most of the value of the US market, the two funds overlap heavily and their returns have historically been very close. The difference lies in the extra small and mid-sized companies VTI owns, which add a little more diversification and a little more exposure to smaller businesses.

This guide explains what each fund holds, how much they overlap, how their performance has compared, how small companies affect the result, how they are taxed, and how investors decide between them or hold both.

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For video explainers on the most widely held ETFs, the FRC Retail Investing video series covers VOO, VTI and many others. FRC’s ETF Investing for Beginners course explains how index ETFs work, followed by ETF Investing Strategies and Advanced ETF Investing.

FRC’s programs and memberships are open to everyone. If ETFs are new to you, FRC’s guide to everything you need to know about ETFs covers their history and how they work.

VOO vs VTI at a Glance

Both funds are share classes of large Vanguard index mutual funds, which share the same underlying portfolios. That structure helps keep their costs among the lowest in the industry.

A Brief History of Both Funds

Both funds have roots in Vanguard’s pioneering index mutual funds. The Vanguard 500 Index Fund, launched in 1976, was the first index mutual fund offered to individual investors, and Vanguard’s Total Stock Market Index Fund followed in 1992.

VTI arrived in May 2001 as one of Vanguard’s earliest ETFs, offering the total market in a share class that traded on an exchange. VOO followed in September 2010, bringing the S&P 500 fund to the ETF market.

Both ETFs share their portfolios with the much older mutual funds they belong to. That shared structure is one reason both can operate at such a low cost.

What VOO Owns

VOO tracks the S&P 500, an index of about 500 of the largest US companies selected by a committee at S&P Dow Jones Indices. Companies must meet requirements for size, liquidity and profitability to be included.

The index is weighted by market capitalization, so the largest companies have the biggest influence. A relatively small group of giant technology and communication companies makes up a large share of the fund.

VOO gives investors the large-company US market in one holding. FRC’s comparison of SPY vs VOO explains how it compares with the other major S&P 500 fund.

What VTI Owns

VTI tracks the CRSP US Total Market Index, which aims to cover nearly every publicly traded US company. It holds more than 3,000 stocks, including all the large companies in the S&P 500 plus thousands of mid-sized, small and micro-cap companies.

Like VOO, VTI is weighted by market capitalization. That means the same giant companies sit at the top of both funds, while the thousands of smaller companies make up a relatively small share of VTI’s total value.

VTI gives investors the entire US stock market in a single purchase. It is one of the simplest ways to own the whole of American business.

How the Two Indexes Are Built

The S&P 500 is chosen by a committee that applies rules on size, liquidity and profitability, including a requirement that companies have positive earnings to be added. That gives the index a slight quality filter.

The CRSP US Total Market Index is entirely rules-based and has no profitability requirement. It includes companies whether or not they are currently profitable, which means VTI owns some younger, faster-growing or struggling companies that the S&P 500 leaves out.

CRSP also uses gradual transitions when companies move between size groups, which helps keep turnover low. These design choices explain much of why VTI changes its holdings so rarely.

How Much Do They Overlap?

The S&P 500 companies represent the large majority of the total value of the US stock market. As a result, most of VTI’s assets are invested in the same companies VOO holds, in similar proportions.

The remaining part of VTI, a smaller share of its value, is spread across thousands of mid-sized and smaller companies that VOO does not own. This is the only real difference in what the two funds hold.

Because of that overlap, holding both funds together adds relatively little diversification beyond holding VTI alone. Many investors choose one or the other rather than both.

Performance: Very Close

Because their largest holdings are the same, VOO and VTI have historically moved very closely together. Over long periods, their returns have differed by only small amounts.

In years when small and mid-sized companies outperform large ones, VTI tends to do slightly better. In years when the largest companies lead the market, as they have for much of the past decade, VOO tends to do slightly better.

Neither fund has a built-in advantage. The small differences in their results come almost entirely from how large companies perform relative to smaller ones in any given period.

The Role of Small and Mid-Sized Companies

Small and mid-sized companies behave differently from large ones. They can grow faster, but they are often more volatile and more sensitive to economic conditions and interest rates.

Academic research has long suggested that smaller companies may earn higher returns over very long periods, as compensation for their extra risk. However, there have also been long stretches, including much of the last decade, when large companies outperformed.

VTI gives investors exposure to this part of the market without having to choose individual small-company funds. VOO leaves it out entirely.

The Cost: Identical

Both funds charge an expense ratio of 0.03%, or $3 a year for every $10,000 invested. That is among the lowest fees available for any ETF.

Because the costs are identical, fees are not a reason to choose one over the other. The decision comes down to which slice of the market you want to own.

Both funds also trade with very tight bid-ask spreads and are available commission-free at most major brokerages. Trading costs are effectively the same for both.

Diversification

VTI is the more diversified of the two in terms of the number of companies. Owning more than 3,000 stocks spreads your money across almost every corner of the US economy.

VOO’s 500 companies already provide broad diversification across sectors, but only among large companies. For many investors, that is more than enough.

Because both funds are weighted by size, neither is evenly spread. In both, the largest companies dominate, so the difference in diversification is real but smaller than the holding counts suggest.

Dividends From VOO and VTI

Both funds pay dividends quarterly, collected from the companies they own. Their yields are typically similar, with VTI’s sometimes slightly lower because many small companies pay little or no dividend.

FRC’s guide to when VOO pays dividends explains its quarterly schedule. VTI follows a similar quarterly pattern.

Neither fund is designed primarily for income. Investors seeking higher dividends often look at funds such as SCHD, covered in FRC’s comparison of SCHD vs VOO.

Taxes on VOO and VTI

Both funds are highly tax-efficient. As ETFs with low turnover, they rarely distribute capital gains, and most of their dividends are qualified dividends taxed at lower long-term rates.

Because index changes happen at the edges of a total market index, VTI tends to have very low turnover. Companies growing from small to large simply move within the index rather than being bought and sold.

Both are well suited to taxable brokerage accounts. FRC’s guides to tax-efficient ETFs for a taxable brokerage account and how to minimize capital gains tax explain how to keep tax bills low.

Tax-Loss Harvesting Between the Two

Because VOO and VTI track different indexes, some investors use them as tax-loss harvesting partners. If one falls in value in a taxable account, they sell it to realize a loss and buy the other to stay invested.

Whether two funds this similar are substantially identical under the wash sale rule has not been clearly defined by the IRS. Many practitioners consider funds tracking different indexes to be acceptable, but it is a judgment call.

Investors planning to use this approach should take professional tax advice. Getting it wrong can mean the loss is disallowed.

Who Tends to Choose VOO

Investors who want a straightforward holding in America’s largest companies often choose VOO. The S&P 500 is the most widely followed benchmark, which makes VOO easy to understand and compare.

Investors who already own separate small-company or mid-company funds may prefer VOO to avoid doubling up. They can build exactly the mix they want around a large-company core.

VOO is also a popular choice for investors who believe large, established companies offer a more stable path. FRC’s guide to how to invest in the S&P 500 explains the index in detail.

Who Tends to Choose VTI

Investors who want to own the entire US market in one fund often choose VTI. It is a natural core holding for a simple, set-and-forget portfolio.

Investors who believe small companies may outperform over very long periods, or who simply want the broadest possible exposure, also favor VTI. It removes the need to decide how much to hold in different company sizes.

Many followers of the simple three-fund portfolio, which combines total US stocks, total international stocks and total bonds, use VTI as their US stock component. It pairs naturally with broad international and bond funds.

Worked Example: Two Long-Term Investors

Two investors each put $500 a month into a fund for 30 years. One chooses VOO, the other VTI.

Because the funds hold mostly the same companies and charge the same fee, both would likely end up with similar balances. Whichever ended up ahead would depend mainly on whether large or smaller companies performed better over those 30 years.

For both investors, the bigger factors in their outcome are investing consistently, keeping costs low and staying invested through downturns. FRC’s guide to how much $500 a month grows over 30 years shows the power of that consistency.

Worked Example: Building a Portfolio

An investor wants a portfolio of 80% US stocks and 20% bonds. Using VTI for the US stock portion gives full market coverage with one fund.

Another investor uses VOO for 70% and a small-company fund for 10%, choosing to tilt slightly towards smaller companies. That combination gives more control over the mix, but requires more decisions and rebalancing.

Both approaches can work well. The choice depends on whether the investor values simplicity or control.

Can You Own Both?

You can, but there is little benefit for most investors. Because the S&P 500 companies make up most of VTI, adding VOO to VTI mainly increases your weight in large companies.

Some investors hold both because they bought them at different times or in different accounts. That causes no harm, but it does not meaningfully increase diversification.

A more effective way to broaden a VOO or VTI portfolio is to add international stocks or bonds. These behave differently from US stocks and offer real diversification. Total international funds and total bond market funds are common partners for either fund.

How They Compare With Other Popular Funds

QQQ focuses on the Nasdaq-100 and is far more concentrated in technology than either VOO or VTI. FRC’s comparison of VOO vs VTI vs QQQ shows how all three compare side by side.

Other providers offer similar funds. iShares and Schwab offer total market ETFs, and Fidelity offers total market index mutual funds such as FSKAX, covered in FRC’s guide to Fidelity index funds.

For most purposes, these funds are close substitutes. Cost, convenience and where you hold your account often decide which one investors use.

The Risks of Both Funds

Both funds are 100% invested in US stocks and will fall when the US stock market falls. In a severe bear market, both could lose a large share of their value.

Both are concentrated in the largest US companies, many of them in technology. When those companies fall, both funds feel it.

VTI’s small-company holdings add a little extra volatility, though their small weight limits the effect. Neither fund includes international stocks or bonds, so investors seeking broader diversification need to add those separately.

Is Your Money Safe in VOO or VTI?

Both funds are regulated investment companies overseen by the SEC, with their holdings kept by an independent custodian. FRC’s guide to Is Vanguard Safe? explains how Vanguard is structured and regulated.

When you hold either fund at a SIPC member brokerage, your account is protected up to $500,000, including $250,000 in cash, if the brokerage fails and assets are missing. This protection does not cover market losses.

Like all stock funds, both VOO and VTI will rise and fall with the market. Their safeguards protect the safekeeping of your investments, not their value.

Keep Learning

VOO and VTI show how small differences in what a fund owns often count for less than investors expect. Understanding the overlap helps you avoid unnecessary complexity and build a cleaner portfolio.

The FRC dictionary is more than a dictionary. It is a library of explainer videos, written explanations and on-page quizzes, so you can open any term, such as index fund, and go deeper whenever something is unclear.

FRC’s programs and memberships are open to everyone. FRC’s Investing for Beginners guide is a natural next step if you are building your first portfolio.

Your Next Step

VOO owns the 500 largest US companies, while VTI owns the whole US stock market, both for the same 0.03% fee. Their returns have historically been very close, with the difference depending on whether large or smaller companies lead.

Choose VOO if you want a pure large-company core, or VTI if you want the entire market in one fund, then focus on investing consistently over time.