VOO vs. VTI: Which Vanguard Fund Is the Better Buy Right Now?
The small-cap exposure of VTI may be particularly vulnerable to high inflation and high rates.
Vanguard offers two popular ETFs, the S&P 500 ETF (VOO) and the Total Stock Market ETF (VTI), both of which are top core holdings for many investors. However, VOO might be the better choice at the moment. VTI's strength lies in its inclusion of smaller companies, but this could be a weakness in the current economic climate. While both funds focus on large-cap stocks, VTI offers exposure to more than 3,500 U.S. companies, implying greater diversification.
However, this diversification is largely based on the number of positions held, and both funds are market cap-weighted, making them quite similar. The overlap between the two is about 88%. The main reason to choose VOO over VTI is its emphasis on smaller companies, which are often vulnerable to higher interest rates. In the current U.S. economic environment, with high interest rates likely to persist, small-cap stocks may face significant challenges.
Therefore, VOO's large-cap focus could prove advantageous in an uncertain economy. For those looking to invest wisely, The Motley Fool's premium services provide stock recommendations and portfolio guidance.
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