VUG vs. VTI Comparison - Which Is The Better ETF For You? (2024)

Can’t make up your mind about which Vanguard index fund to invest in? At the end of this post, you may have a clearer idea to help you answer the question, VUG vs. VTI: which is the better ETF?

Your investment decisions must be based ideally on the state of your current portfolio. Consider building a portfolio around some high-rated ETFs if you have just started investing.

Exchange-Traded Funds (ETFs) are preferred by long-term investors looking for viable returns in the long run with lower volatility. In addition, ETFs are also a preferred form of investment for their dividend yield as, over time, it constitutes a significant percentage of the overall shareholder’s return.

We have compared two popular ETFs from the Vanguard Group: the Growth Index Fund (VUG) and the Total Stock Market Index Fund (VTI).

We will be looking at the key features of the two funds, their differences, similarities, and comparative performance. But first, a word about your investment needs and ETFs.

Before we proceed, here are some investment platforms that can help you with your investment needs.

• Empower – is a free online platform that helps you track your investments and gives recommendations to pay the lowest fees possible. Read our full Empower review for more information about the platform.
• M1 Finance. Need help investing in stocks for as low as $100 with no trading or brokerage fees? Check out the services of this platform in our M1 Finance review and start investing!

Try M1 Finance Today

VUG: Vanguard Growth Index Fund ETF

VUG by the Vanguard Group is a growth index fund ETF incepted in 2004. VUG tracks the CRSP US Large Cap Growth Index. VUG has around 267 holdings and offers a convenient approach to match the US’s largest growth stocks’ performance.

As the fourth least expensive ETF at 0.04%, VUG is regarded as a very sensible large-growth fund that inhibits turnover and charges a marginal fee.

VUG reflects a full-replication approach intended for a passive laid-back fund management approach. It has an expense ratio of 0.04% and has around $82.51 billion worth of net assets.

The fund focuses mainly on growth companies. A highly impressive fund, VUG has consistently outperformed the S&P index over the past decade. The popularity of VUG can be attributed to a very low expense ratio and no minimum investment requirement.

VTI: Vanguard Total Stock Market Index Fund ETF

VTI is a Vanguard total stock market index fund founded in 2001. This widely diverse and passively managed investment fund tracks the CRSP US Total Market Index Fund. With around 4,033 holdings in the market, it is a market-cap-weighted fund that only entails US-based public companies.

VTI has an expense ratio of 0.03% and does not require a minimum initial investment.

It has $291 billion worth of assets under management (AUM). According to Vanguard, VTI is a well-invested and low-expense fund, which minimizes tracking error, leading to better returns.

VTI involves large, middle, and small-cap-sized equities featuring all sectors, company sizes, and investment styles within the US.

VTI is created to provide the average local investor a chance to invest in US-based firms and give them the chance to leverage the growth of these companies. VTI focuses on both the potential returns from the investment and the potential downside risk if the investment does not become successful.

While its most appealing feature would be its capacity to provide extensive exposure to large-cap companies, its very low expense ratio of 0.03% makes it a very popular investment option for long-term investors.

VUG Vs. VTI: Key Differences

VUG and VTI are index funds offered by the Vanguard Group. These are low-cost funds ideally suited for long-term investment, but there are significant differences between the two funds.

Let’s have a look:

• VUG is a growth index fund ETF, while VTI is a total stock market index fund.
• VUG tracks the CRSP US Large-Cap Growth Index, while VTI tracks the CRSP US Total Market Index Fund.
• VUG has 267 holdings in its portfolio, while VTI has 4,033 holdings. It means VTI is quite bigger than VUG.
• The value of the net assets of VUG is $82.51 billion, while VTI’s net asset value is $291.07 billion. Since VTI has a significantly higher number of holdings, its higher net asset value also makes sense.
• VUG has an expense ratio of 0.04%, while the expense ratio of VTI is 0.03%. While both funds offer a very reasonable cost, VTI has slightly less fees.
• VUG has a dividend yield of 0.4%, and VTI has a dividend yield of 1.1%.

After looking at the key features of the two funds, let’s look at the composition and performance of VUG and VTI.

VUG Vs. VTI: Composition Differences

One of the significant differences between the two funds is their size. While VTI has 4,033 different companies in its portfolio, VUG has 267 companies only.

Listed below are the top 10 companies in VTI’s portfolio and their percentage composition. These top ten companies constitute around 23% of the entire portfolio of VTI.

Now let’s look at the list of top ten companies in VUG’s portfolio. It has 267 holdings in its portfolio, while the top ten companies constitute 49.7% of the total portfolio:

It shows that VTI is a more diverse stock. On the other hand, VUG has fewer holdings and is not very diversified compared to VTI. Its top ten holdings constitute almost 50% of its entire portfolio.

A less diverse portfolio may also translate into higher volatility. Although the top ten holdings in VUG’s portfolio have been performing very well during the last ten years, it is not guaranteed that the trend will continue in the same way in the next ten years.

VUG Vs. VTI: Performance Differences

If we compare the performance of the two funds for the last ten years, we can see that VUG has outperformed VTI by around 2%. When we look at the past five years, VUG outperformed VTI by around 4.5%.

VUG has also outperformed the S&P 500 index consistently.

Here are the returns of VUG during the last ten years.

Here are the returns of the last ten years’ performance of VTI.

While VUG may be performing better than VTI, it does not imply that VTI is not a consistently higher performer. VTI has also been outperforming the S&P 500 Index.

VTI Vs. VUG: Fees

Both VTI and VUG have lower expense ratios and require no minimum initial investment.

With an expense ratio of 0.04%, VUG charges slightly more than VTI, which offers a steady marginal expense ratio of 0.03%.

So how do we decide which fund is better? There is no hard and fast rule when considering building or expanding your portfolio.

The above comparison reflects both funds as very good investment options. The two both have very minimal expense ratios but offer different things. For instance, while VUG offers more prospective returns, it is also more volatile due to lower diversification and riskier. On the other hand, VTI offers more diversification.

Frequently Asked Questions – VTI Vs. VUG

Is VUG Better Than VTI?

VTI and VUG are both viable investment options as they offer investors exposure to high-growth companies. While VUG offers more returns, it is comparatively more volatile. On the other hand, VTI is a more diversified fund, offering less risk but possibly lower returns. Therefore, if you prefer higher returns at the cost of higher volatility, then VUG is a better option than VTI.

Is VUG the Best Growth ETF?

As a consistently high-performing ETF, VUG is among the front-runners in the large-cap growth funds and has historically offered high returns in the past couple of years.

Is VUG a Good Investment?

If you seek exposure to large-cap growth companies and high returns, then VUG is one of the best investment options.

Conclusion – VTI Vs. VUG: Which is the Better ETF?

These two ETFs offered by the Vanguard Group have proven themselves to be excellent investment options for different reasons.

If you’re willing to take the risk due to the higher volatility of the fund, you can consider investing in VUG. On the other hand, if you want a lower expense ratio than VUG and want more diversification, then VTI may be a better option.

So, on the question of VTI vs. VUG, it is all based on your investment preferences as an investor. Team VTI may opt for diversification, meaning less risk but lower returns, and Team VUG may prefer taking more risks for the sake of higher returns.

Hoping that you’d put all the information in this article to good use, it’s ultimately your call. Make it good!

Related Reads:

• VOO Vs. VOOG – Which One Should You Choose?
• SPLG Vs. SPY – Which Is A Better Buy?
• FTBFX Vs. FXNAX: A Detailed Comparative Analysis
• VIOV Vs. VBR – Which Small-Cap ETF Is Better?
• QCLN Vs. ICLN – A Comparison Of Two Clean Energy ETFs

Want to start investing with no fees? Start your investment journey with M1 Finance today!

Try M1 Finance Today