We will explore the difference between Vanguard S&P 500 ETF (VOO) vs Vanguard Information Technology ETF (VGT).
Vanguard has a ton of options when it comes to exchange-traded funds (ETFs).
Choosing between two funds can be difficult, but I will make it easy for you to decide between VOO and VGT.
VOO vs VGT
The primary difference between VOO and VGT is the index they track. VOO tracks the S&P 500 index, while VGT tracks the MSCI US Info Technology 25/50 Benchmark Index.
VOO aims to track the S&P 500 index
VGT is aiming to track higher growth companies with the MSCI US IMI Info Technology 25/50 Benchmark Index
- Tracks the performance of the MSCI US IMI Info Technology 25/50 Benchmark Index.
- It has an expense ratio of 0.10%
- No minimum initial investment
- Holds 357 stocks
- Tracks the performance of the S&P 500 Index
- It has an expense ratio of 0.03%
- No minimum initial investment
- Holds 508 stocks
VOO vs VGT Performance
Vanguard's VOO and VGT have performed differently over the last 10 years. This is expected since they track different indexes.
VOO's total return over 10 years is 12.56% per year, while VGT's total return over 10 years is 17.83% per year. This is a difference of 5.27% each year!
Here is a chart illustrating this difference:
Similarities between VOO and VGT:
- Vanguard Funds
- Low Expense Ratios
- Exchange-Traded Funds (ETFs)
VOO and VGT Differences
The main difference between VOO and VGT is that VOO tracks the S&P 500, while VGT tracks a higher growth index with companies in information technology. By tracking high-growth technology companies, VGT has been able to return a better performance but with higher volatility.
Differences between VOO and VGT:
- Different Number Of Holdings (~500 vs ~357)
- Level Of Diversification
- Fund Inception: 2010
- Expense Ratio: 0.03%
- Number Of Stocks: 508
- Top 10 Holdings: 28%
Vanguard S&P 500 ETF (VOO) received a big endorsement when Warren Buffett recommended it!
Here are VOO's top 10 holdings:
The fund has $731.5 billion in total net assets.
VOO comprises Microsoft, Apple, Alphabet, Amazon, and Berkshire Hathaway and provides exposure to over 500 stocks.
No Minimum Investment
VOO and VGT are exchange-traded funds (ETFs), so there is NO minimum investment. Investors looking to buy fractional shares can use platforms like M1 Finance. (Get $50 When You Use This Link)
Normally, fractional shares are not available for ETFs, but with M1 Finance, you can purchase fractional shares with no commission.
Buying fractional shares allows you to maximize your investment. You no longer have to keep your money idle until you have enough to purchase a total share.
This is especially beneficial for ETFs with a high share price like VOO and VGT (~$400/Share and $415/Share).
Here is your guide to ensuring you get the M1 Finance $50 Bonus.
I also use Personal Capital to track my investment fees. They have a free Retirement Fee Analyzer that tells you the future impact of fees on your portfolio.
Personal Capital's free tools allow you to easily find which of your investments has high fees so you can switch them to low-cost options. (Get a $20 Amazon Gift Card with this link when you add at least one investment account containing a balance of more than $1,000 within 30 days)
VOO Historical Returns
Take a look at the historical chart below. You will see VOO and the S&P 500 closely overlap:
- Fund Inception: 2004
- Expense Ratio: 0.10%
- Number Of Stocks: 357
- Top 10 Holdings: 57.1%
Here are the top 10 holdings for the Vanguard Information Technology ETF (VGT):
The fund has $54.1 billion in total net assets.
VGT comprises Apple, Microsoft, NVIDIA, VISA, and Mastercard and provides exposure to over 300 stocks.
However, with the top 10 holdings making up over 50% of the portfolio, it isn't very diversified compared to other ETFs such as Vanguard Total Stock Market Index Fund ETF (VTI).
Which is Better VGT or VOO?
VGT and VOO are significantly different investments. VGT offers a more aggressive allocation geared towards high growth, but that can mean much bigger swings in day-to-day price.
Investors who have been able to hold during the ups and downs have been rewarded with ~6% higher returns yearly than VOO.
Still, this doesn't mean the next 10 years will look the same.
For those reasons, I would say that both are great options for long-term investors, but you should know that with VGT, you have the potential for higher returns and greater risk.
If having a larger basket of stocks helps you sleep at night, VOO would be a better option.
Another big difference is that with VOO, the top 10 holdings make up 28% of the total portfolio, while with VGT, they make up 57%. That means the performance of the top 10 companies will have a bigger impact on returns with VGT than VOO.
Lastly, it's important to consider costs and fees because they can cost you in the long run.
Here Are More Comparisons of VGT and VOO:
Is VGT or VOO Better for Financial Independence?
VGT and VOO can get you to Financial Independence Retire Early (FIRE). They both have strong long-term investment returns and low expense ratios.
I feel more comfortable owning VOO because of the increasing diversification and lower expense ratio.
My Winner: VOO
My winner is VOO because it has a more diversified portfolio and a lower expense ratio.