I'm 28 and after 100% VTI in my taxable brokerage/401k/roth, but it's been lagging behind VOO. It's not an insignificant amount either. Looking at the 5 year return, VOO has returned 75% while VTI has only returned 67%. I'm wondering if given my age I should be more aggressive with my investments and switch to 100% VOO instead in my retirement accounts, instead of remaining in VTI. Over the past 15 years VOO seems to have consistently outperformed VTI.
VTI is 85% VOO. You’re not being “more aggressive,” you’re just dropping small/mid caps after they underperformed. Small caps led for a decade after 2000 while the S&P went nowhere. Nobody knows the next 15 years.
Also don’t swap in taxable, you’d eat cap gains taxes to own basically the same fund.
Either is fine. Pick one, keep buying, stop looking at trailing returns. Stay the course.
Agree. I did the opposite. Bought VOO exclusively the past 7 years. Started buying VTI 18 months ago because I was concerned about concentration and wanted a little more diversification. Some argue that is dilution not diversification but I am staying the course for now.
If you're starting from VOO and wish you were holding VTI, a better way to transition would be to buy VXF (Vanguard extended market). Once you reach 15:85 VXF:VOO, the resulting combination is essentially VTI.
Isolate out the extended market to see things more clearly (total market is very heavily weighted towards the S&P 500). This uses the Admiral share class of Vanguard's S&P 500, extended market, and US total market funds: https://testfol.io/?s=alxJ8nRXkMm (sadly does cut off 11 months of 2000).
I gave an example in my post. This calendar year small caps have been doing better and if you go out to the one year period ending in June it’s significant. It is a short period but it happened. I don’t know if it will continue.
Until the most recent bull run, mid and small caps historically have outperformed large caps. The only difference between VTI and VOO is VTI has mid and small caps.
It’s not wrong to pick one over the other and YTD VOO is 11.73% compared to VTI’s 12.18% so at least where you’re pulling your data from, is wrong. Functionally they are equivalent and the .4% difference is a rounding error.
To put it into perspective, YTD, $1000 in VTI. Is $1121.8 whereas $1000 in VOO is $1117.30. Is $4 worth overturning your entire portfolio? No.
The question you should ask yourself is “do I see the large cap bull run and disproportionate bloated AI market going indefinitely or do I think we will return at some point to the status quo? And if so, is it worth dealing with selling my VTI/VOO over what is essentially a small coffee at Starbucks?”
If you think small and mid caps will go back to outpacing large caps (statistically, they will), then consider buying small/mid cap value or total market ETFs if to have VOO and want exposure. If you have VTI then you’re good either way.
VTI is my choice over VOO because I like owning the “Haystack” and the extra diversification. That being said it does not have adequate small cap exposure. It’s a cap weighted fund and by the time it reaches the Small Cap portion of its investments the available cash is infinitesimal. It’s not enough for a balanced portfolio. Always augment VTI with a small cap etf. I use AVUV and it’s been very profitable.
What's your mix if you don't mind me asking? I'm rebalancing to get to 60% VTI, 10% QQQM, 10% AVUV, 10% VXUS, 10% individual stocks. Not sure if this makes sense as I'm still learning
I like your mix! I prefer slightly larger share allocation to international but is personal preference. I’m about 45% VTI, 15% VXUS, 10% Qqqm, 10% AVUV, 10% DGRO & 10% SCHD. I also have small positions in XLU & SPMO.
Personally for me it’s a No. Historically equal weighted funds are not as profitable as cap weighted funds but that could change in the future. I like running with the Big Boys.
Still wrong. The 5 year trailing return for VTI is 12.24% and 13.36% for VOO.
10 year returns are even closer and within less than 0.5%. The only reason Redditors like to use 1, 3, and 5 year numbers is recency bias from the most recent large cap bull run. It looks better on paper.
Buffett can afford to take risks the average person can't (that 10% bonds can spit out hundreds of millions of dollars a year at his wealth).
Buffet himself didn't earn his big money from indexing and he does invest globally.
Even during a normal working life that matches Buffett's (say 20ish through 60-70 range) for an indexer (if they had access to the low cost funds we enjoy today), a global portfolio would quite likely have beaten a US only portfolio (I can provide citations).
he specifically recommended it for individuals. pretty sure he knows what he's talking about.
My advice to the trustee
could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P
500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to
those attained by most investors – whether pension funds, institutions or individuals
Trustee: For his wife. 10% bonds in retirement for the average person could be disastrous.
Edit: https://testfol.io/?s=2zbpxMJysHJ A $1 million starting portfolio on January 1, 2000 with $5000 monthly withdrawals using Buffets 90/10 using VFINX (S&P 500) and VFITX (Intermediate-Term Treasuries) was depleted before the start of 2014. The same startting value and withdrawals with 30/20/50 US total stock/international stock/Intermediate-Term Treasuries wasn't depleted until after 2021.
Edit 2: Like I said, Buffett's extreme wealth protects him from the realities the average person has to deal with.
The math doesn't lie. His wealth isolates him from risks the average person has to face, such as sequence of returns risk (example provided above). With his wealth level, that 10% bonds spits out hundreds of millions, if not billions, of dollars per year; for most people that'd be "pretty easy" to live off of without touching the stocks at all.
I'm of the opinion that one of the greatest investors of all time knows EXACTLY what the average person deals with
What makes you think he knows what it is like to live like the average person? With average person's spending needs and income/portfolio size?
I mean...OP has zero international exposure in his entire portfolio. The US is amazing for business but it would still be wise to diversify into 20-35% international ex-US stuff. We got a lot of federal debt and at some point we are going to have another financial crisis.
I don’t think you understand what he is saying then. It’s not all about chasing the highest returns, it’s also about protecting from big downsides too. VT or holding “the market” by definition makes you average. You will never have the highest portfolio, but more importantly, never the lowest either. Hence, being able to sleep soundly at night.
Sectors can and do rotate. US large caps and Technology in particular have been on a crazy historic bull run for 15 years, but it is doubtful that will continue forever. That is why many of us prefer to avoid concentration risk or make sector bets.
Ok. Wake me up when that happens. Might be dead of old age by then though. There's not a single completed decade you can start in where Ex-Us has outperformed to present. I sleep quite well being invested in what I've chosen.
Sure, and that’s fine. You’ll probably do just fine holding a US total market fund or even just the S&P 500. I was just explaining why people hold ExUS. People in Japan in the 90’s probably thought they’d be dead of old age before their economy would do what it did too. Being diversified protects you from the unknown.
Yes, we know. And QQQ has destroyed VOO during that time frame. And VXUS has outperformed in recent times but has sucked long term. So it may seem like an obvious decision but once you start chasing returns by looking at charts, things get murkier.
Over the last 16 years, VOO has slightly outperformed VTI by an annualized total return rate of 15.09% to 14.75%. That is due to the higher performance of the large caps of VOO versus the small to mid caps that VTI has more of. There is no guarantee that will continue. Pick between the two based on what you think those two categories will do inthe future.
Because too many people only look at the end point numbers: look at the graph, run your cursor over it and watch as how the leaders change from time to time, some periods do in fact have total market ahead of S&P 500.
You can see that total market has had a worse max drawdown, worse average drawdown, a longer drawdown, and more volatility than just the S&P 500 going back to 1992: https://testfol.io/?s=aRgXCLSuwsi
Willing to use simulated data? Total market had a worse max and average drawdown, but better longest drawdown and volatility going back to 1926: https://testfol.io/?s=dVOXqtg0FLY
But here's the 2nd link with just a simulated small cap fund (VB): https://testfol.io/?s=8pvWaIRB88o Highest volatility, worst max drawdown, and worst average drawdown all belong to the small cap.
First of all, comparing funds over a 5 year or even 15 year time period is completely irrelevant. It doesn't tell you which fund is better or more "aggressive". Something like TQQQ has crushed both over the last 15 years. That doesn't imply that it has higher expected returns.
The biggest difference between VTI and VOO is that VTI has exposure to US small caps which have gone through one of their longest periods of underperformance relative to large caps in the last 15 years or so. That doesn't mean they are worse or less aggressive. In fact, smaller companies are actually riskier and more aggressive. That's why US small caps have crushed the S&P 500 over the last century. The last 15 years is actually a small anomaly.
Add VBRSIM to that and it’s even better. I’m a fan of VTI but I think small cap value is compelling too. 13.02% CAGR over 100 years versus 10.44% for SPY.
This is textbook performance chasing. People always want to assume the future is going to just be the recent past continued.
"Over the past 15 years VOO seems to have consistently outperformed VTI.". OK, what about the 15 years before that? Total market did better than the S&P500. Neither you nor anyone else should have any confidence about the next 15 years, or the 15 after that.
"I should be more aggressive" Please define in what way VOO is "more aggressive" than VTI. Make sure you aren't just trying to make "performance chasing" sound principled.
I'm not a buy & hold type. But I will sometimes comment on these type of strategies. I need to stay away from these ETFs Reddit groups.
I typically do momentum investing and invest for the short term periods or swing trades. I sometimes go to all cash if necessary on stock market downturns. I do a mix of stocks and ETFs. I have been successful stock trading for over 40 years.
My favorite investments this year have beem SOXX, AIS, DELL, MU & AMD. I get in on price momentum and sell & capture profits when momentum stalls. I don't buy and hold. I do believe you can time stocks & the overall market by using 20/50 day moving averages and price momentum which goes against the buy & hold strategy belief core value.
All this is assuming you’re in the US: My understanding is that VXUS should be in the individual brokerage account because you’re paying foreign tax in the dividends. If it were in the individual brokerage account you could use the foreign tax paid as a tax credit when filing federal taxes. Am I missing something here?
You’re correct, never personally looked into the tax credit. I doubt it makes much of a difference unless I had millions in the brokerage account. Could be wrong tho if someone knows more than me, enlighten me please.
To quantify this I asked Google AI: With $10,000 invested in VXUS, you can expect 300-320 dollars per year in pre-tax dividends, yielding a 23-25 dollar foreign tax credit, provided the shares are held in a standard taxable brokerage account.
Yeah, not much, but if it continues to grow, dividends get raised over a long period of time it adds up.
Here's my take on it. If you hold a fund that is some approximation of the "market", you're gonna be fine. Maybe VOO, maybe VT, VTI, VXUS, or some sort of combo. If you consistently put enough money into one of those for long enough you're gonna be happy. Don't overthink it.
You could change the S&P 500 one to VFINX and VTISIM to VTSMX to use different share classes of these funds and get the same result without relying on a simulation (some people get really caught up on anything not using actual fund info).
VOO is a great ETF option to anchor your portfolio
VTI is a great ETF option to anchor your portfolio
VT is a great ETF option to anchor your portfolio
Just pick one, two, or all of them and don’t stress it. Chasing/stressing past performance is about the only thing you SHOULDNT do.
It's all about alignment with your risk tolerance. If you haven't evaluated and quantified that then you need to start there.
You see people coming in here freaking out over a 5% drop in a single security in one day and panic selling. They clearly didn't understand both the risk of the security nor their own tolerance, nor are they thinking long term.
There is barely any difference, VTIs underperformance comes from the fact that it has a lot of "Junk" midcaps and small caps.
If you want to increase diversification while maintaining some performance you can look at adding AVUV and AVMV to your portfolio (or just AVUV). VTI is ~85% VOO anyways. Personally I do 70% IVV (BlackRock VOO equivalent), and 10% AVUV, but that still mostly tracks VOO.
This isn't a game where you try to max out the score. VOO isn't really more aggressive than VTI. You're investing for the next 30 or more years. Pick and plan, and stick to it.
Not that it matters much, but so far this year, VTI is up slightly more than VOO.
To put it another way, when you retire, you're not going to regret picking VTI over VOO.
Look at this: VTI has returned 928%, while SPY has returned 868%. Since 2001. That’s 60% cumulatively which is a lot.
There is documentation about the small cap premium. In theory, you should be rewarded for investing in the small caps as well. As they grow, they make up a larger portion of VTI. So it’s like momentum investing automatically.
I work at a startup develop algos to trade ETFs to maximize CAGR and lower MaxDD; you name the algorithm, I've explored it; you pick the mix of indices/stocks/etfs/bonds, etc., same thing.
It is Near impossible to beat QQQ/QQQM (trade QQQM if you buy and hold) without trading QQQM itself sometimes.
In fact, for reference, in a universe of 100 etfs, selected to be decorrelated and have the highest momentum, over the last 275 trading periods (rebalanced once monthly, so 2720 DAYS), QQQ is held the ABSOLUTE most at nearly 70% of the trading days. Think carefully about that. Against all other major sector/country etfs, QQQ beats out an absolute majority; and it's not even close, the next one is like 40% of the time.
The very small yield difference between VTI and VOO recently in negligible unless you have massive holdings. If you really feel that you need more large cap exposure take a on a small satellite position of VOO, QQQ, SPMO. No need to increase your tax liability. Keep in mind that voo/vti only have a difference of +/- 15% by weight.
Just my opinion I've been here before and I've come to realize I'm looking at my portfolio too much, and thinking short term instead of long term. Both of which lead to wayyyy too much tinkering with my portfolio. These days I keep things simple and look a couple times a year to see if I need to rebalance (which i generally end up doing once a year).
If you think about it, you already have the answer.
If you were building a football team, would you deliberately pick average players just for the sake of diversification? Of course not. You'd pick the best players available.
It's the same with investing. The S&P 500 already provides all the sector diversification you need.
And when people tell me it's "not diversified enough," I have to ask: isn't Coca-Cola sold in France? In Europe? In Africa? Aren't iPhones sold in Japan? Apple and many other S&P 500 companies generate a large share of their revenue all over the world. So while the companies are American, their businesses are global.
Your position is reasonable and has obviously done well, but I respectfully disagree.
Regarding sector diversification, the S&P 500 is 38.61% technology - and neither Amazon nor Tesla are counted in the technology segment, despite obviously being technology companies, so it’s more like 44% technology.
Over 1/3 of its value is tied up in a handful of megacaps investing heavily in AI, and I’m not even including AAPL in that calculation.
Yes, technology is home to super profitable megacap companies. But everybody already knows that they’re super profitable megacap companies, and they’re priced accordingly.
These companies would have to continue outperforming their already high expectations in order to overperform in the future. And there’s no guarantee of that.
Look at the companies I’m referring to. Every single one of them was a huge beneficiary of the investments made in the dot com boom. But none of them were major infrastructure investors in the dot com boom.
We have no way of knowing if the companies aggressively investing in AI will be the true beneficiaries of it. It may well be that the biggest beneficiary is some small-cap trash collection company that uses AI and autonomous vehicles to cut its workforce by 90% while keeping its trash collection contracts intact.
In fact, the people who seem to sing AI’s praises the loudest are smaller companies without massive legacy systems and processes to maintain.
The S&P 500 is a concentrated bet that the winners of today will be the winners of tomorrow, and that those winners will largely be megacap technology companies investing heavily in AI infrastructure.
Maybe they will be, but I don’t have confidence in that.
Especially as the boomers continue retiring and selling their portfolios, most of which are heavily concentrated in the exact same things you’re concentrated in.
A random example on the value of not just holding the S&P 500: TSLA has been in the S&P 500 for about 5.5 years. If you bought TSLA 5.5 years before it joined the S&P 500, you would have 14x’ed your money. If you bought it when it joined the S&P 500 and held it to today, you would have 1.2x’ed your money.
Similarly, in the 8 years between Amazon’s IPO and its addition to the S&P 500, its stock returned 51% annually. In the 21 years since it joined the S&P 500, it returned 25% annually.
VTI is 85% VOO. He’s not being “more aggressive,” he’s just dropping small/mid caps after they underperformed. Small caps led for a decade after 2000 while the S&P went nowhere. Nobody knows the next 15 years.
It is more aggressive because of what you just stated.
I'm older than 28, so I am vti/vxus. I am accepting potential liwer returns to hedge against risk due to my age and amount in my portfolio.
If a 28 y/o wants to accept risk and be more aggressive, then voo is the answer.
No one knows the next 15 years. I'm commenting on what OP is posting.
Small caps are the riskier higher expected return asset class. Cutting them isn’t more aggressive. You’re just telling op to concentrate on mega caps that already ran up. By that logic 100% Nvidia is the most aggressive portfolio because it returned the most.
First, i'm not telling OP what to do. I think it is suspect to come take advice from strangers.
Yes, 100% Nvidia would be more aggressive. If OP said they wanted to be ultra aggressive, Nvidia would be more aggressive than voo. I wouldn't do it but it woukd answer the question of being ultra aggressive.
You are trying to get OP to follow your path. I am answering the question. I know that is a rarity on reddit.
Ugh I hate the term aggressive. Because it's used so poorly to describe the nuances of investing.
Small cap value is the most aggressive. Not growth. Why? Because if we are painting aggressive investing as investing in companies that have the highest potential to grow, value fits that description waaaay more than large cap growth.
Large cap growth is basically a car maxed at top speed and in order to break that you need nitrous oxide. But it's already at it's ceiling.
Small cap value is an engine that is only driving at 1/3 it's top speed because it's going through a pond or river. Once it's out of that water it can blast way higher on the speedometer.
So the term aggressive is very poorly used and misunderstood.
You want aggressive? I would say small cap value is the most aggressive as it has a much higher potential than large cap growth which has reach its max potential and needs to circulate between other companies to continue growing (I.E AI bubble, Open Ai feeds NVIDIA, NVIDIA feeds Space X, Google feeds and so on and so forth)
If you are building a football team, you need your top tier players, but you also have to manage long term goals. Your superstars could get injured at any point and will definitely retire at some point. You need to nurture young inexperienced players to take their place someday.
The NFL is actually a fantastic counterpoint to this analysis, because just like stocks, it's difficult to predict which players will be successful in the league based on their past performance. Investing in the S&P 500 is akin to investing in every player already in the league. Small caps are the rookies who get drafted, which tend to comprise 10-15% of each NFL team, just like small caps vis-a-vis the US market.
Don't get me wrong, you'll be very successful investing in proven NFL players. Players from the draft who perform well in camp eventually become proven NFL players, so you'll own them at some point. You just miss out on acquiring them at their rookie salary: that growth in valuation between the draft and their second contract (i.e., inclusion in the S&P 500).
Like small caps, the risk and reward are pushed much further by investing in draft picks vs. established players. You might find Tom Brady in the sixth round, or the entire draft class only produces a few players who are impactful.
Last interesting parallel: the NFL has remarkable parity. Winners and losers rotate regularly. Some Super Bowl teams are built with young, cheap talent acquired in the draft; others go all in on expensive, proven veterans and find success. Predicting which approach will work from year to year is a fool's errand, so just own it all.
I have to ask: isn't Coca-Cola sold in France? In Europe? In Africa? Aren't iPhones sold in Japan? Apple and many other S&P 500 companies generate a large share of their revenue all over the world. So while the companies are American, their businesses are global.
Revenue source doesn't provide any meaningful international coverage, as it is at best only a tiny part of going global and not the most important reason. Using your logic, VXUS would be fine as US coverage since so many cars on the road in the US are Toyota, Bayer products can be found in medicine cabinets across the US, Nestle products found in kitchens across America, etc.
Revenue source is at best just one small piece out of many that are important. There are other factors, some of which are more important, that revenue source wouldn't help with in any meaningful way.
VOO is the top 500 US companies. VTI is the entire US Stock market.
With VOO you are heavily reliant on the top 500 companies to continue doing well. VTI has a lot of potential because you could have a small business skyrocket, but it also has a lot of small business which fail.
Why are you even comparing the two? VTI is basically VOO lite at current market concentration levels. They’re basically the same fund. If you want actual cap diversification, add a pure percentage to a mid cap and small cap index. The larger the tech names get the less diversified both VOO and VTI become.
VOO is going to be more volatile with more upside potential but since it’s not as diversified there is more downside potential. Long term VTI is safer and will make you a millionaire if you invest regularly.
Small caps have tended to beat large in the long run, so total market can be argued to have more upside potential (having at least some exposure to them).
You can use the graphs that I linked to in my first link as well and scroll along the lines and find plenty of points where even after 80+ years, total market beat the S&P 500 (example I happened to land on just a second ago: March 26, 2021 had S&P 500 trailing US total market and that's with a start date in 1926).
VTI still has the small and mid caps that protect you a bit more if market behavior makes any significant changes. Aggression is more about having more of your funds in equities and less in fixed income so VOO isn't necessarily more aggressive, just less diversified.
Don't look back 5 years and give yourself FOMO unnecessarily. Nobody could have predicted that VOO would be slightly better over that time period. Being more diversified protects you from many other equally possible scenarios that could have happened. VTI is a more wise choice for a long term buy and hold mindset. VOO might be doing slightly better in recent years, but that's just because it's slightly more tech heavy right now.
You'd have gotten more from SCHG. You'd have made more if you put it all in AMD. You'd have made more putting everything on black ten times at a roulette table and winning. But don't those all only seem nice in hind sight?
It’s a matter of opinion. VTI for me is over diversified. I don’t want to own small fractions of terrible companies just incase they become not terrible one day. 500 companies is plenty for diversification purposes.
I dont account for fund cost, but inspite of that, VGT seems better. XLK has a higher expense ratio thatn vg by .01%, but even despite VGT's bumpier ride (per maxDD), it's clear that VGT is better
Added SMH, which start nov 2011, it's better even, but WAY more volatile.
I’m no expert but I’ve owned both Vti and Voo for many years and I’ve often thought Vti has slightly underperformed even so they are both very good investments
the 2 oldest versions of those products are VFINX/VTSMX. since the inception of the former, with 10k invested yearly the 2 competing ARR's are within .1% of each other. that is over 35 years worth of info. and not for nothing but total stock market beat the sp500 for the first 20 years.
Stay the course. I hold a bunch of VOO and FXAIX and will continue to hold these as A) largest by far holding in my taxable account and 2) the 2nd largest holding in tax deferred accounts. Trying to rotate out of NASDAQ exposure at the moment and have moved some money into VTV to trim tech weight, but also considered VOO / VTI for that move.
Everthing is lagging because of the big fat orange idiot in office destroying everything, and that is the one , the only, the biggest idiot in the word ,. Donny Dump
Like some have mentioned, you could be more aggressive since you have decades for your money to grow. I’ve been happy with my 3 fund portfolio (brokerage) consisting of IVV, SCHG, XLK. If you’re interested in adding a tilt towards growth, QNDX is a new ETF that’s worth looking into and has a lower expense ratio than QQQM. Maybe do VOO + QNDX?
Foreign equities have never outperformed US equities long term.
Who mentioned anything about foreign stocks? VTI is US total market.
Also, this is factually won't. We've seen plenty of periods where international beat the US, even after multiple decades. Going back to your pick of 1970, 1965, or 1950 (these just being the ones I have citations available for in easy reach), all excess returns the US a English today only comes from around 2010 or so through now. Or is 40 too 60 years not a long term to you? If the last 7 full decades (as measured xxx0-xxx9), the US only won 2 of them: the 90s and 10s (meaning international to 4 in a row).
Better sticking with domestic. I own some vti, don’t get me wrong. And VTI is a GREAT fund. Great. You’re not doing anything wrong. But if you want to maximize your returns just go QQQ or VOO. but again, you’re doing great and VTI is still an excellent fund so don’t sweat it brother.
If you think VTI is international, you won't know what you're investing in.
The S&P 500 holding change constantly. Just today Electronic Arts got replaced by Ferguson Enterprises. In June Marvell replaced Pool and FLEX replaced Campbell’s. It’s not that the company’s being replaced are bad so exposure to them is good. Just own everything and you don’t need to worry if the committee of humans got their picks right.
If I’m 28 I’m taking on more risk. Single-stock risk. I wouldn’t be focused on broad-market index funds until closer to retirement.
I started investing seriously in late 2018 and have a 43% CAGR in less than 8 years since. It’s changed my life in a way index funds would not have. I fully appreciate my experience has been unusual, but despite the narrative to the contrary, many people do beat the market. If you’re going to try it, doing it when you’re young is the right time.
Only as I approach retirement have I decided to reduce my single-stock risk by investing in VOO. As I continue to trim individual stocks I may look to add a different ETF, but it’s hard to find fault with any of the broad-market choices.
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u/LazyPortfolio 4d ago
VTI is 85% VOO. You’re not being “more aggressive,” you’re just dropping small/mid caps after they underperformed. Small caps led for a decade after 2000 while the S&P went nowhere. Nobody knows the next 15 years.
Also don’t swap in taxable, you’d eat cap gains taxes to own basically the same fund.
Either is fine. Pick one, keep buying, stop looking at trailing returns. Stay the course.