VTI or VOO - which one to be 30-50% of my net worth?
I am 38 years old. I have around 400K in savings. Live on rent. Not interested in buying a house right now. I am not sure I can afford anything that I like. Or even commit to a place for 20 years right now
Go for VOO (S&P 500). Do not go for VTI (total market/all companies)
S&P 500 includes all the relevant companies (500 is a pretty big number) in the market. Beyond the S&P 500, its some small caps. Too speculative and risky and not necessarily higher returns. In fact, as you can see in image - they are a drag on returns.
S&P 500 includes all the relevant companies (500 is a pretty big number) in the market. Beyond the S&P 500, its some small caps. Too speculative and risky and not necessarily higher returns. In fact, as you can see in image - they are a drag on returns.
Yes, the small caps in VTI are not really exciting growth companies. They are has-beens. Companies that could not make it.
The exciting small caps are all private in venture capital or PE territory. At that small market cap - $1-2B, companies do not really go public these days. These are the small caps who could not make it big or the ones who were big at some point in their life. Sad companies.
The exciting small caps are all private in venture capital or PE territory. At that small market cap - $1-2B, companies do not really go public these days. These are the small caps who could not make it big or the ones who were big at some point in their life. Sad companies.
Your net worth is irrelevant here. VTI is an inferior index to track against. It includes "random" small companies.
Your age would have been a factor had you brought up Nasdaq 100 (QQQ) or some niche or something volatile. Both VOO and VTI are meant for conservative investing with VTI just being inferior.
Your age would have been a factor had you brought up Nasdaq 100 (QQQ) or some niche or something volatile. Both VOO and VTI are meant for conservative investing with VTI just being inferior.
Which companies are in VTI but not in VOO?
In terms of numbers - there are a lot. VTI has around 3500 companies compared to 500 in VOO/S&P 500. So 3000 more companies in VTI. But
1. Market cap of S&P 500 (VOO) - 52T
2. VTI (based on CRSP total market index) - 56T
So an additional 3000 companies at 4T total additional market cap.
So on average these companies are approx 1.3B in market cap each. Exceptionally small caps.
Avoid VTI
1. Market cap of S&P 500 (VOO) - 52T
2. VTI (based on CRSP total market index) - 56T
So an additional 3000 companies at 4T total additional market cap.
So on average these companies are approx 1.3B in market cap each. Exceptionally small caps.
Avoid VTI
Not worth finding out the answer. And I suspect you will never have an answer. Both are extremely similar.
VOO 3 year IRR is 13.1%
VTI 3 year IRR is 12.3%
You will be fine with both
VOO 3 year IRR is 13.1%
VTI 3 year IRR is 12.3%
You will be fine with both
My problem with total market, as its been mentioned above, is that it is an inferior product under all conditions and you are giving up almost 1% annual returns for nothing.
You are giving up the extra 0.8% for getting those small caps. You might get higher returns if some of them become mega caps.
That is incorrect.
When smallcaps become larger, they end up becoming a part of S&P 500 as they reach mid scale. In simplified terms - when a small company becomes bigger than the 500th company of S&P500 - it joins VOO (S&P500) (I have oversimplified but this is largely the principle)
When smallcaps become larger, they end up becoming a part of S&P 500 as they reach mid scale. In simplified terms - when a small company becomes bigger than the 500th company of S&P500 - it joins VOO (S&P500) (I have oversimplified but this is largely the principle)
Dont do either of these 2. Buy a Nasdaq 100 tracking index like QQQ. These are the stable companies of today.
I agree. I know Nasdaq 100 is not the primary "stable" index for people because they tend to think more diversity is better. So "total market" > S&P 500 > Nasdaq 100. But these are the 100 companies moving the economy. And 100 is diverse enough.
Nasdaq 100 is too volatile to be 30-50% of net worth. The up/down movements will be 2-3x daily.
Why not consider VT? (Not VTI) - Its the Vanguard total world stock index. US is not the only market. You can have a more balanced portfolio.
Take SPLG over VOO. Its cheaper - expense ratio is 0.02% and VOO is 0.03%