VOO vs VGT – What is the Difference?

An Overview of VOO vs VGT

VOO
(Vanguard S&P 500 ETF)
VGT
(Vanguard Information Technology ETF)
Benchmark IndexS&P 500 IndexMSCI US Investable Market
Information Technology
25/50 Index.
StylePassivePassive
Inception Date07 Sep 201026 Jan 2004
Expense Ratio0.03%0.10%
Number of Stocks509341
Yield1.50%0.82%
% of 10
largest holdings
26.85%55.64%
AUM$194.2 B$41.5 B
As of 4/1/2021
Source: advisors.vanguard.com

Vanguard funds are known for their low cost ETF. So it is no surprise that both these ETFs have some of the lowest expense with the VOO at 0.03% and VGT at 0.10%. This means that for every $10,000 you invest, you are only paying $3 and $10 respectively each year in management expenses.

VOO has a dividend yield of 1.50% vs VGT’s 0.82%. If you are buying for dividend too, then this is something to consider.

Fund Composite VOO VS VGT

Top 10 Fund Holdings

VOOVGT
Apple Inc. (AAPL)
6.00%
Apple Inc. (AAPL)
19.55%
Microsoft Corp. (MSFT)
5.44%
Microsoft Corp. (MSFT)
15.83%
Amazon.com Inc. (AMZN)
4.08%
NVIDIA Corp. (NVDA)
3.22%
Facebook Inc. (FB)
1.92%
Visa Inc. (V)
3.19%
Alphabet Inc. (GOOGL)
1.88%
Mastercard Inc. (MA)
2.99%
Alphabet Inc. (GOOG)
1.83%
PayPal Holdings Inc. (PYPL)
2.74%
Tesla Inc. (TSLA)
1.59%
Intel Corp. (INTC)
2.36%
Berkshire Hathaway Inc. (BRK.B)
1.43%
Adobe Inc. (ADBE)
2.09%
JPMorgan Chase & Co. (JPM)
1.39%
salesforce.com Inc. (CRM)
1.87%
Johnson & Johnson (JNJ)
1.29%
Broadcom Inc. (AVGO)
1.80%
26.85% of total asset55.64% of total asset
As of 4/1/2021
Source: advisors.vanguard.com

Top 10 holdings of VOO only makes up a quarter of the total asset compared to almost half of the total asset for VGT. From this we can gather that performance of VGT could hinge a lot on the top 10 holdings.

Another thing that I noticed with VGT is that companies such as Amazon, Facebook and Google are not included in the ETF. Amazon is classified as Internet & Direct Marketing Retail and Google and Facebook are under Interactive Media & Services. This means they do not fall under any the sub categories in VGT as seen below.

Sectors

With VOO, you get diversification across the different sectors including Information Technology.

Sector Diversification for VOO
Source: advisors.vanguard.com

But with VGT, you are investing only on the Information Technology sector. We can see that VGT invests 23.1% of the fund in companies that are under the Technology Hardware, Storage & Peripheral category.

Sub IT categories for VGT
Source: advisors.vanguard.com

Overlapping Counters

VOO vs VGT Overlapping Counters

There are a total of 76 overlapping counters between VOO and VGT. These counters makes up 27.28% in VOO. This means if you buy VOO, you are also buying part of VGT.

Performance of VOO vs VGT

Using the Portfolio Visualizer to back test these 2 ETFs, we can then compare the portfolio growth between Jan 2011 – Mar 2021. The time period was constrained by the available data for Vanguard S&P 500 ETF (VOO).

VOO vs VGT Portfolio Growth

This is what you would have ended up with in Mar 2021, if you have invested $10,000 at the beginning of 2011.


VOO (Vanguard S&P 500 ETF): $38,811
VGT (Vanguard Information Technology ETF): $65,449

From the graph above, we can see that VGT outperform VOO’s by more than double in returns. This is an additional $26,638 in returns when compare with VOO.

Annual Returns

VOO vs VGT Annual Returns

The last 10 years has been an absolute bull market for both VOO and VGT. Looking at the chart, it was only in 2018 that VOO has a negative return of 4.5%.

Annualized Returns

1 Year3 Year5 Year10 YearSince Inception
VOO56.33%16.75%16.26%13.87%15.31%
VGT70.38%29.41%28.21%20.15%13.06%
As of 4/1/2021
Source: advisors.vanguard.com

The 10 years annualized return for VOO and VGT are 20.15% and 13.87% respectively. These are rather decent returns for funds that are passively managed.

Conclusion

Based on the past performance, VGT (Vanguard Information Technology ETF) is the one to pick with a portfolio growth of almost doubled more than VOO.

It also perform better in terms of the annual returns. There has been no negative annual returns in the last 10 years.

That said, I was rather surprised to find that companies like Amazon, Facebook and Google aren’t in the VGT list. But then, we can see that this didn’t prevent VGT from outperforming VOO.

I’m leaning toward VGT here, simply because of the performance, and I do believe that technology sector will continue to outperform in the future, compared to other sectors.

However, if you want a more diversified portfolio, then stick with VOO. You can’t go wrong with a 10 year annualized return of 13.87% too.

As always, remember that Past Performance is No Guarantee of Future Results.