VTI vs VUG: Side-by-Side ETF Comparison

Which one is better? VTI offers total market exposure across all sectors and company sizes, while VUG targets high-growth, large-cap U.S. companies especially in tech. Choose VUG for aggressive growth potential, or VTI for broad diversification and balanced long-term performance.

Table of Content

ETF Issuers & Investment Objective

• VTI: Introduced by Vanguard in 2001, the Vanguard Total Stock Market ETF (VTI) aims to replicate the performance of the CRSP U.S. Total Market Index. This includes the full spectrum of publicly traded U.S. stocks spanning large-, mid-, small-, and micro-cap companies making VTI one of the most comprehensive and diversified equity ETFs available.
• VUG: Launched by Vanguard in 2004, the Vanguard Growth Index Fund ETF (VUG) seeks to track the performance of the CRSP U.S. Large Cap Growth Index. It focuses on large-cap U.S. companies with strong growth characteristics, emphasizing sectors like technology, consumer discretionary, and communication services.

Annual & Cumulative Returns

VUG’s strong historical returns particularly over longer periods are a direct result of its concentrated exposure to high-growth sectors, especially technology and consumer discretionary. These sectors tend to outperform during economic expansions, giving VUG an edge during bullish cycles. VTI, by contrast, mirrors the total U.S. market, including slower-moving segments like small-cap value and defensives, which helps cushion volatility but slightly mutes upside in booming markets.

Risk Metrics

The elevated volatility of VUG reflects its nature as a growth-focused ETF, where sharp price movements are more common. What stands out is that despite the higher risk, VUG delivers better compensation per unit of volatility, as seen in its Sharpe ratio. VTI’s lower volatility may appeal to conservative investors, but it tends to lag when growth stocks dominate the market narrative.

• Volatility reflects the degree of price fluctuations; higher volatility often correlates with greater risk and potential returns.
• Sharpe Ratio measures risk-adjusted returns, where higher ratios indicate more favorable returns for the risk assumed.

Dividend Yield & Growth

VTI clearly has the upper hand when it comes to dividend income, thanks to its inclusion of mature companies with stable cash flows. VUG’s growth stocks often reinvest profits instead of distributing them, resulting in a lower yield. For investors prioritizing regular income, VTI serves as a more consistent cash-generating asset, while VUG caters to those seeking capital gains over yield.

Fees & Liquidity

Both funds remain cost leaders in the ETF space, making them accessible for long-term compounding. VTI is marginally more cost-effective, and its vast asset base also contributes to tighter spreads and superior liquidity under most market conditions. Although the difference is minimal, cost-sensitive investors may lean toward VTI for maximum efficiency.

Explanation:

• Expense Ratio is the annual fee taken by the fund manager, expressed as a % of your investment.
• Bid-Ask Spread is the difference between the buying and selling price. Smaller spreads mean lower transaction costs.

ETF Composition: Asset Classes

The difference in allocation reflects each ETF’s core objective: VUG is laser-focused on large-cap U.S. growth stocks, while VTI seeks to replicate the entire U.S. equity market. As a result, VTI introduces more diversity not just across market caps, but also by slightly increasing exposure to non-U.S. stocks and cash equivalents. This broader base helps buffer sector-specific risk.

Regional Allocation

Geographically, both funds remain overwhelmingly domestic, but VTI offers a touch more international diversification. Although the exposure to non-U.S. equities is small, it aligns with VTI’s goal of capturing the full investable U.S. universe, including companies with global operations or foreign listings. VUG’s U.S.-centric strategy limits such reach, prioritizing clarity and focus over global spread.

Sector Weights

Sector allocation is a defining trait of these ETFs. VUG’s tech-heavy profile means it rises and falls with the fortunes of a few dominant industries, making it a great pick for investors bullish on innovation. VTI spreads risk more evenly across sectors like financials, healthcare, and energy offering a steadier, more all-weather approach to market exposure.

Top 10 Holdings

VUG’s portfolio leans heavily on a handful of dominant players, with Apple, Microsoft, and NVIDIA comprising a substantial chunk of assets. This approach can supercharge performance when these stocks rally but leaves the ETF more vulnerable to pullbacks in big tech. VTI minimizes this concentration by holding thousands of stocks, thereby reducing dependency on any single company’s success.

Valuation & Growth Metrics

Valuation Ratios

The premium valuation of VUG underscores investor expectations for future earnings acceleration. Its high multiples are justified by rapid growth trajectories but also signal greater downside risk if expectations aren’t met. VTI’s lower valuations provide a margin of safety and better reflect a balanced market view appealing to investors focused on long-term value and capital preservation.

Explanation:

• P/E Ratio = Price divided by earnings. Indicates how expensive a fund is relative to profits.
• Price/Book = Price vs book value (assets minus liabilities).
• Price/Sales = Price relative to total revenue.
• Price/Cash Flow = Price relative to how much cash the companies generate.

Growth Expectations

VUG’s edge lies in the pace of growth its holdings consistently post double-digit gains in earnings, sales, and cash flow, validating its higher valuations. VTI, while still showing healthy fundamentals, mirrors the aggregate economy and includes sectors with more modest trajectories. For those aiming to amplify portfolio growth, VUG presents compelling upside, whereas VTI emphasizes stability through market breadth.

Which ETF Fits Your Portfolio - VTI vs VUG?

Deciding between VTI and VUG comes down to how you prioritize growth, diversification, and risk management in your portfolio.

VUG is built for investors seeking high-growth potential and are comfortable with volatility. Its focus on large-cap innovators especially in tech makes it a strong pick during bull markets, though it provides little in terms of income and carries more concentrated risk.

VTI, by contrast, is a comprehensive, low-cost vehicle that spans the entire U.S. equity market. With exposure to over 3,000 companies across all sectors and sizes, it provides built-in diversification, moderate volatility, and a steadier stream of dividends making it a dependable core holding for most long-term investors.

In many cases, the smartest move isn’t either-or. Combining both can create a balanced strategy: VTI for broad, stable exposure and VUG for amplified growth when markets favor innovation-driven sectors.