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VOO And VTI Overlap Quite A Bit: So Which Is Better For Long Term Investors?

edited August 3 in Fund Discussions
By Jim Sloan, SA contributor.


° VOO is based on the S&P 500 and VTI on the Total Stock Market, adding the 22% of stocks not included in the 500; long term they have performed similarly.

° Both are market cap weighted and heavily tilted toward the 10 largest stocks which are 28.5% of VOO and 23.4% of VTI.

° Jack Bogle preferred VTI because it contained "everything." Warren Buffett put the S&P 500 in his will for his wife, perhaps because it is tilted toward large cap growth.

° Longer term charts show similar returns while a one year chart clearly shows the outperformance of smaller caps, thus VTI, starting September 2020 with recognition of economic growth.

° There are several quirks in the way these index ETFs are put together, plus some interesting differences in statistical metrics and industry composition; VOO is more tax efficient.



  • beebee
    edited August 3
    I ran these two funds (I changed VOO to VFINX) to allow PV (portfoliovisualizer) to go back to 2002. I included VWINX and PRWCX to further compare a withdrawal strategy over the last 19 years. I used a 6% withdrawal rate (pretty aggressive) for each of the 19 years to compare the income generation each fund would provide and their suitability as a long term investment for capital preservation and income.

    Interesting results (click on Comparison between):
    Comparison between VFINX, VTI, PRWCX, and VWINX

    My observations:

    Comparing these four funds from 2002-2021 provides insight into why allocation funds are so beneficial for both income and capital preservation. Both VWINX and PRWCX navigated the Tech Bubble and the Great Recession preserving capital while at the same time providing greater yearly withdrawal amounts than either of the etfs.

    It took 14 years for both (VOO) VFINX and VTI to overtake VWINX. From 2002 - 2016 VWINX outperformed VTI and VOO (VFINX) on a rolling return basis. PRWCX accomplished this feat every year (2002-2021) providing both more income per year as well as higher yearly portfolio balances.

    Future Consideration:

    From the perspective of both income and capital preservation, would an investor be less harmed (opportunity cost risk verses sequence of return risk) owning VWINX verses an Total Equity Market Index?

    At the start of retirement or the start of one's investment career, I would consider owning an allocation fund such as VWINX or PRWCX and consider reallocationg into VOO or VTI when markets periodically sell off.
  • @Mark,

    Unclear to me why one would make this apple-orange comparison, but in any case I think VONE is always good to include.
  • beebee
    edited August 3
    Interesting path these two funds took over the last 34 years (VFINX verses PRWCX):
  • David Girux stated on several interviews that PRWCX’s long term goal is to provide equity-like return but with lower volatility. The long term culminated return of PRWCX is higher as showed in the above graph. Lower drawdown through severe market decline is what makes such big difference. I think a combination of good stock picking and having a flexible investment mandate allows this fund to excel. Although I wish the fund should have closed earlier.
  • edited August 4
    The performance of VOO and VTI should be very similar over the long term.
    Exposure to small-cap/mid-cap stocks and index methodology may be considerations.
  • Har, I posted my fruit snark without checking PortfolioVisualizer, which shows very close to perfect and full correlation.

    (You have to use mfunds instead of the etfs to get a better long look).

    V similar w VONE as well.

    So what's the point of going beyond SP500? Let also the active management arguments resume or revive.
  • beebee
    edited August 5
    So what's the point of going beyond SP500?
    When it come to Large Cap Equity exposure, an S&P 500 index is a great choice. Many LC funds are nothing more than closet index funds with a much higher ER. Some LC managers differentiate themselves. It's important to have good reasons to own a LC fund because beating the index is a pretty high bar.

    At times, Mid/Small/Micro Cap periodically out perform VONE, VFINX and VOO. Two fund I own that persistently out perform are T Rowe Price's PRNHX and Primcap's POAGX. Does owning a percentage of these funds in your portfolio add alpha? So far so good.

    Here's a historical comparison of VFINX, PRNHX, and POAGX:

    Comparing S&P 500 to Other Cap weighted Funds

    I am guilty of owning sector funds that historically have better upside and downside capture than the index. These funds typically make more when the market is up and lose less when the market sells off.

    This capture data can be found under the "risk tab" on the M* website. For example here's PRMTX's Capture data:

    Here's the link to M* risk tab for PRMTX


    Here's a Chart and table (linked below) that shows S&P 500 sector performance over the last 14 years.
  • edited August 5

    My question had been better put as What do we gain or lose over the long term by expanding from VOO to VONE to VTI ?

    And the answer is very very little.
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