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VOO vs VOOG: ETF Comparison Guide

VOO vs VOOG: ETF Comparison Guide
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In recent years, exchange-traded funds (ETFs) and other broad-market index funds have made investing infinitely simpler. Whereas before, investors had to mainly rely on choosing individual growth stocks from high-value companies (and choose wisely), with ETFs and index funds buying a share in the fund instantly delivers investment in a wide selection of some of the top companies. ETFs and other broad-market funds also allow for more diversification and are a favorite of those seeking financial freedom.

While ETFs are an excellent investment and popular among investors, choosing the best options with so many of them available can be tricky. Two popular funds are the Vanguard S&P 500 ETF (VOO) and the Vanguard S&P 500 Growth Index Fund ETF (VOOG). Although both VOO and VOOG are similar, there are some differences between these two Vanguard funds. The following will compare VOO vs VOOG so you can decide which of these investment options might be best for you.

What Are ETFs?

Before we jump into VOO vs VOOG, we need to establish what an ETF is. Exchange-traded funds are investments that track an index, commodity, sector, or other assets. ETFs can be bought and sold on the stock market exchange and structured in various ways. While an ETF can contain many types of investments, they are designed to give investors broad exposure to the companies in whatever sector or index is being tracked.

There are two broad categories of ETFs: value and growth funds. Value funds comprise of shares of companies trading at a lower price than what the company performance would indicate it should. On the other hand, a growth fund includes growth companies that have outperformed the market and have the potential to continue doing so.

Why Invest in ETFs?

While mutual funds have been available since the 1920s, ETFs take advantage of popular mutual funds over individual stock portfolios to the next level. ETFs’ most significant benefits include increased diversification, a low expense ratio, average or above-average investment returns, tax advantages, and trading flexibility.

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VOO Overview

Description

The Vanguard S&P 500 ETF is primarily of value funds and contains stocks from 507 of the top companies in the U.S. VOO tracks the S&P 500, a stock market index containing the largest companies in the United States based on market cap. As of 12/31/21, the total net assets of the Vanguard S&P 500 ETF are at $856.1 billion.

Index

As mentioned, VOO tracks the S&P 500 index, which comprises large-cap value stocks. The sector composition of the S&P 500 index is vast and includes tech stocks, health care companies, communication services companies, and financial sector companies.

Fees

There are no fees when investing in VOO.

Expense Ratio

The expense ratio for the Vanguard S&P 500 ETF is 0.03%, and there is no minimum investment requirement.

Holdings

There are 507 companies currently included in the holdings of VOO. The top 10 holdings make up 30.4% of the fund’s net assets and include tech giants Apple, Google, Microsoft, Tesla, Amazon, JPMorgan Chase & Co., and Berkshire Hathaway. With so many top global companies represented, those who own shares of the VOO ETF own stocks in most of the leading companies available today.

Volatility

Since VOO tracks the S&P 500, which is considered the best indicator of stocks in the U.S. overall, VOO’s volatility will closely reflect that of the overall market. VOO has a volatility rating of 21.32%, which makes it a reasonably steady fund.

Drawdown

As with any fund, VOO has had its share of drawdowns over the years. However, the highest drawdown since 2010 occurred on March 22, 2020, and was 33.99%. It took 97 trading sessions for the Vanguard S&P 500 ETF to recover from this drawdown.

Dividends

Dividends for VOO are distributed quarterly. Over the past 12 months, the dividend yield was 1.34%, and the dividends distribution for 2021 are as follows:

  • Quarter 1 – $1.2625 per share
  • Quarter 2 – $1.3329 per share
  • Quarter 3 – $1.3040 per share
  • Quarter 4 – $1.5329 per share

Annual Returns

Historically, the S&P 500 index has earned positive returns averaging 10% a year. Because VOO seeks to match the performance of the S&P 500 index, its past performance has similarly been relatively stable over time but will not beat the S&P’s performance. Since its inception, VOO has had average annual returns of 16.17%, and the 1-year, 5-year, and 10-year average annual returns are as follows:

  • 1-year returns at 28.66%
  • 5-year returns at 18.43%
  • 10-year returns at 16.51%

Portfolio Growth

The portfolio has grown tremendously over the past decade. If you had invested $10,000 into the fund in 2010, it would be worth nearly $50,000 today for a total return of approximately 397.76%.

Read our related article: VOO vs QQQ

VOOG Overview

Description

The Vanguard S&P 500 Growth Index Fund ETF (VOOG) contains 304 growth stocks from growth companies in the S&P 500 Growth Index. As of 12/31/21, the total net assets of the Vanguard S&P 500 Growth Index Fund ETF was $8 billion.

Index

As mentioned, VOOG tracks the S&P 500 Growth Index, which contains growth companies in the S&P 500. The index measures growth stocks using three factors: sales growth, the ratio of earnings change to price, and momentum. Sector composition of the growth index is similarly diverse but weighted towards communications services, consumer discretionary, and information technology sector.

Fees

There are no fees when investing with VOOG.

Expense Ratio

The VOOG expense ratio is 0.10% and no minimum investment.

Holdings

There are 304 companies currently included in VOOG holdings. The top 10 holdings make up 55% of the fund’s net assets and include tech sector companies like Apple and Microsoft, Amazon, Home Depot, and Netflix. As a result, those who own shares of this growth fund invest in the top companies from various industries.

Volatility

While VOOG still tracks companies in the S&P 500 because these are high-growth companies, VOOG performance is slightly more volatile. While not seen as having extremely high volatility, it is higher than VOO at a rating of 29.40%.

Drawdown

VOOG similarly has had drawdowns over the years, with the drawdown peaking on March 22, 2020, when the fund fell 31.41%. It took 55 trading sessions for the portfolio to recover from this drawdown.

Dividends

Dividends for VOOG are also distributed quarterly. Over the past 12 months, the dividend yields were 0.60%, and the dividends distribution for 2021 are as follows:

  • Quarter 1 – $0.3425 per share
  • Quarter 2 – $0.3614 per share
  • Quarter 3 – $0.4411 per share
  • Quarter 4 – $0.4662 per share

Annual Returns

The S&P 500 Growth Index has historically earned returns averaging nearly 19% since 2010. Because VOOG seeks to match the performance of the Growth Index, VOOG performance has similarly been high. Since its inception, VOOG has had average annual returns of 18.78%, and the 1-year, 5-year, and 10-year average annual returns are as follows:

  • 1-year returns at 31.78%
  • 5-year returns at 23.93%
  • 10-year returns at 19.07%

Portfolio Growth

The portfolio has grown tremendously over the past decade. If you had invested $10,000 into the fund in 2010, it would be worth nearly $62,000 today for a total return of approximately 517.97%.

Read our related article: VTSAX vs VTI

VOO vs. VOOG: Key Differences

There are a few similarities and several differences when comparing VOO vs VOOG. First, both funds are Vanguard ETF products and track the S&P 500. The expense ratio for both funds is low, there is no minimum investment, and either fund would be an excellent investment to add to your portfolio. With that being said, there are some significant differences between the two funds.

Primarily the key difference between VOO and VOOG is in which part of the S&P 500 they track. While VOO tracks the S&P overall, VOOG tracks the S&P 500 Growth Index. Other differences when comparing VOO vs. VOOG include:

  • The expense ratio of VOOG is higher than VOO (0.10% vs. 0.03%)
  • VOO has more holdings than VOOG (507 vs. 304)
  • VOOG has a higher volatility rating than VOO (29.40% vs. 21.32%)
  • VOO had a higher dividend yield last year (1.34% vs. 0.60%), and the dividend payout per share was also higher
  • Over the past ten years, VOOG did outperform VOO at the 1-year, 5-year, and 10-year marks
  • VOOG’s portfolio growth has also outpaced VOO (517.97% vs. 397.76%)

Read our related article: VOO vs SPY

VOOG vs VOO: A Side-by-Side Comparison

S&P 500 ETF (VOO)S&P 500 Growth ETF (VOOG)
IssuerVanguardVanguard
Expense Ratio0.03%0.10%
Minimum Initial InvestmentNoneNone
Net Assets$856.1 billion$8 billion
Average Daily Volume (Last 30 Days)7.221 million186,983
IndexS&P 500 IndexS&P 500 Growth Index
Number of Holdings507304
IndustryTop U.S. OverallTop U.S. Overall
Top 3 HoldingsApple, Microsoft, Alphabet (Google)Apple, Microsoft, Alphabet (Google)
1-Year Returns28.66%41.46%
10-Year Returns16.51%17.17%
ESG Score7.727.87
Data as of 2/7/22

How to Invest in VOO and VOOG

Investing in VOO and VOOG is simple, especially since both funds are Vanguard products. However, that does not mean you need to open an account with Vanguard. Because Vanguard maintains agreements with other firms, most major brokerages offer to trade a Vanguard mutual fund or ETF. The catch is that these other brokerages may charge fees or higher expense ratios, so it is likely worth it to open a Vanguard account to save on brokerage fees.

To get started, open an account with Vanguard. Once your account is open, connect a bank account or other mode for funding your account. Next, decide which fund or funds you want to invest in, choose how much you want to invest, and make your purchase. You can set up automatic investments monthly, on another term basis, or invest when you want without a set schedule.

When Is the Best Time to Buy either VOO or VOOG, and Which Should I Buy?

When is the best time to invest? It’s a common question, especially when deciding between two good products in the ETF industry like VOO and VOOG. However, waiting for the “best time” to invest could end up costing you, especially if you’re planning to make a long-term investment. So rather than worry about the most suitable time to invest, focus on investing early and staying consistent. One of the most common pieces of investment advice is that time in the market beats timing the market. As to which you should buy, VOO vs. VOOG, the answer to that will depend on your goals and risk tolerance as an investor.

Both VOO and VOOG have performed well over the past decade, and with no trading fees through Vanguard, both afford opportunities for solid returns. VOO will most appeal to those looking for broad exposure to large-cap value stocks. VOO also has a lower expense ratio at just 0.03%. However, if your main priority is growth and returns and you aren’t afraid of more risk, then VOOG is the better option. While VOOG has a higher expense ratio at 0.10%, with no fees for trading through Vanguard, VOOG is one of the most inexpensive growth fund options out there.

VOO vs. VOOG: Which Is Better for Financial Independence?

Any investment carries risk, and it’s the same when considering VOO vs VOOG. With that being said, those looking to secure financial independence may have a hard time choosing between VOO vs VOOG because both have performed well in recent years. Your choice will come down to your FI timeline and which option is better for you: growth stocks or value stocks?

VOO tracks the S&P 500 and will typically bring in average returns because of this. VOOG, on the other hand, may tend to bring in higher returns because the focus is on growth companies. Either fund will likely be a great addition to your portfolio. Still, for those looking to reach financial independence quickly, VOOG is the clear winner due to its potential for above-average performance and superior annual returns.

VOO vs VOOG – Which Is the Better ETF?

VOO vs VOOG, which is the better fund for you? Both VOO and VOOG are popular ETF options and have performed well over the past decade. They are also inexpensive to invest in and should continue to perform well in the years to come. Your decision will likely come down to risk vs. return. Investors looking for enduring value and at least average returns will likely prefer VOO, while investors okay with more risk looking for above-average returns and fast growth will probably choose VOOG.

If you still can’t decide, consider making VOO and VOOG a part of your portfolio. Vanguard and other brokerages also have a financial advisor available to help you determine which funds may be best for you. VOOG vs. VOO, which fund will you choose?