Investors looking to choose between two popular Vanguard ETFs, the Vanguard S&P 500 Growth ETF (VOOG) and the Vanguard S&P 500 ETF (VOO), should consider key factors such as expense ratios, dividend yields, and sector compositions, which distinguish these funds in the current market landscape.
Over the past year, VOOG, which is centered on growth stocks, has shown robust performance. Meanwhile, VOO offers a lower expense ratio and higher dividend yield, making it an attractive option for those seeking broader market exposure.
Both ETFs are focused on large-cap U.S. stocks but have different investment strategies. VOOG specifically targets the growth segment of the S&P 500 Index, while VOO encompasses the entire index, providing a more diversified investment. Investors should examine their preferences for focused growth versus comprehensive market coverage when deciding between them.
Looking at the financial metrics, VOOG has an expense ratio of 0.07% compared to VOO’s 0.03%. Additionally, VOOG’s 1-year return stands at 19.3%, while VOO has delivered a 15.4% return. VOO is also more lucrative for income-seeking investors, offering a dividend yield of 1.1%, significantly higher than VOOG’s 0.5%.
In terms of risk and performance, VOO has exhibited a lower maximum drawdown over the past five years, at 24.52% versus VOOG’s 32.73%. Furthermore, if $1,000 had been invested five years ago, VOO would have grown to $1,826, whereas VOOG would have risen to $1,920, illustrating VOOG’s higher risk-reward potential.
The composition of these ETFs reflects their strategic focus. VOO holds 505 stocks, with significant allocations to technology at 37%, financial services at 12%, and consumer cyclical at 11%. Its top holdings include industry giants like NVIDIA, Apple, and Microsoft, which offer a broad representation of the U.S. economy, helping to mitigate volatility over time.
Conversely, VOOG has a more concentrated portfolio, with 58% allocated to technology and a total of 212 holdings. Its primary investments heavily skew towards NVIDIA, which constitutes 13.53%—more than double its next two holdings. This heavy reliance on tech-driven growth presents both opportunities and challenges, particularly as these stocks can exhibit increased volatility.
In summary, investors should align their ETF choice with their investment goals. VOO serves those seeking stability and diversifying their portfolio, while VOOG appeals to investors willing to embrace higher risks for potentially greater growth. Notably, the booming artificial intelligence sector may provide growth opportunities for VOOG, suggesting a bright outlook for tech-centric investments.
Thus, both ETFs present unique advantages, allowing investors to select the option that best meets their risk tolerance and long-term objectives.