VUG vs VTI: Side-by-Side ETF Comparison

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

Table of Content

ETF Issuers & Investment Objective

• 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.
• 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.

Annual & Cumulative Returns

VUG consistently outperforms VTI across all timeframes, particularly over the past 3 and 10 years. This is largely driven by its focus on growth-oriented companies, especially in the technology sector, which have seen explosive gains during bull markets. VTI, while delivering strong performance, includes a wider range of small- and mid-cap stocks as well as value-oriented firms, which tempers its upside during growth-driven rallies.

Risk Metrics

With higher volatility figures across both 1- and 3-year periods, VUG comes with more pronounced swings an expected trait for a growth-heavy ETF. However, this elevated risk is compensated by a superior Sharpe ratio, indicating better risk-adjusted returns than VTI. VTI’s broader market exposure results in smoother performance, but with a trade-off in return potential during fast-growth cycles.

• 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

Income-oriented investors may favor VTI, as it offers a significantly higher dividend yield (~1.52%) compared to VUG’s modest payout (~0.59%). VUG prioritizes reinvesting earnings into business growth, which is typical of its underlying holdings. Meanwhile, VTI includes mature, dividend-paying companies that generate steady cash flow making it more attractive to those seeking income in addition to capital appreciation.

Fees & Liquidity

In terms of cost efficiency, both ETFs are among the most affordable on the market, but VTI edges out slightly with a 0.03% expense ratio versus VUG’s 0.04%. While spread and volume data aren't specified here, both ETFs benefit from Vanguard’s scale and tend to have tight bid-ask spreads and high liquidity, making them easily tradable even for large investors.

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

VUG’s portfolio is almost entirely made up of U.S. equities, with just 0.27% in international stocks and negligible cash. This concentration reflects its aim to capture U.S.-based high-growth companies. In contrast, VTI spreads its allocation slightly more, holding a bit more cash and international exposure, aligning with its total-market tracking objective that includes every segment of the U.S. equity market.

Regional Allocation

Both ETFs are overwhelmingly North America-focused, but VTI has slightly more geographic diversity, including exposure to Europe and other developed markets. VUG’s holdings are nearly 100% U.S.-based, which reflects its benchmark index's design that targets domestic growth giants. While the difference is minor, VTI’s inclusivity gives it marginally broader global representation.

Sector Weights

The stark contrast in sector weighting tells the story of these ETFs. VUG is heavily skewed toward technology (nearly 50%) and communication services, which are sectors that have propelled much of the market’s growth in recent years. VTI, by comparison, spreads exposure more evenly across sectors, including meaningful weights in financials, industrials, and healthcare, making it a more balanced and diversified vehicle.

Top 10 Holdings

VUG is top-heavy in megacap tech stocks like Apple, Microsoft, and NVIDIA, with just these three accounting for over 30% of the portfolio. This concentrated exposure drives returns but increases single-stock risk. VTI, while also holding these names, assigns them much smaller weights due to its broader universe of over 3,000 stocks, reducing exposure to any one company.

Valuation & Growth Metrics

Valuation Ratios

Growth comes at a price literally. VUG’s valuation ratios are significantly higher across the board, with elevated P/E, P/B, and P/S multiples, reflecting investor optimism about future earnings potential. VTI’s lower valuations suggest more modest expectations but also offer better entry points for value-conscious investors seeking diversified exposure without paying a premium.

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

The growth metrics highlight why VUG commands those higher valuations. Its portfolio companies have delivered exceptional historical earnings and sales growth, with forward-looking estimates also favoring rapid expansion. VTI’s growth rates are solid but reflect the average of a market that includes slow-growing sectors like utilities and real estate. Investors chasing aggressive expansion may prefer VUG, while those seeking steady compounding may lean toward VTI.

Which ETF Fits Your Portfolio - VUG vs VTI?

Choosing between VUG and VTI depends on your investment goals, risk tolerance, and market outlook.

If you’re a growth-oriented investor with a higher risk appetite and a long-term horizon, VUG may be the better fit. It offers concentrated exposure to high-growth tech giants and innovation-driven companies, which historically have outperformed during bull markets. However, this comes with greater volatility and minimal income.

On the other hand, VTI is ideal for broad market exposure and long-term stability. It holds the entire U.S. stock market from large caps to micro caps offering greater diversification, lower volatility, and a higher dividend yield. It's particularly suitable for investors seeking a core holding that balances growth and income.

Ultimately, VUG can serve as a growth booster in your portfolio, while VTI works well as a foundational, all-in-one ETF. You don’t have to choose just one many investors combine both to balance aggressive upside with steady market exposure.