VUG vs VOO – What is the difference?

Before deciding which index ETF to invest in, you can find out more on what an ETF is, or what an Index is, and why invest in ETFs here.

An Overview of VUG vs VOO

Vanguard Growth ETF
(VUG)
Vanguard S&P 500 ETF
(VOO)
Benchmark IndexCRSP US Large Cap Growth IndexS&P 500 Index
Management StylePassivePassive
Expense Ratio0.04%0.03%
Number of Stocks257509
% of 10 largest holdings45.05%27.21%
Dividend Yield0.63%1.57%
As of 31/12/2020
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 VUG at 0.04% and VOO at 0.03%. This means that for every $10,000 you invest, you are only paying $4 and $3 respectively each year in management expenses.

The dividend yield for the VOO (1.57%) is higher than that of VUG (0.63%). This is expected because VUG consist of Growth companies. Growth companies usually retain their a large portion of their earnings for company growth and expansion, instead of distributing it to shareholder as dividend.

Main Difference between VUG vs VOO

VUG tracks the CRSP US Large Cap Growth Index. This index is made up of growth stocks of large U.S companies. Because only companies that falls under the growth category are included, we can see that there are lesser number of stocks compared to VOO.

VOO tracks the S&P 500 index. The index is dominated by the stocks of large U.S. companies. This can be a blend of large growth and value companies which is why it accounts for a larger number of stocks.

Top 10 Holdings

Vanguard Growth ETF
(VUG)
Vanguard S&P 500 ETF
(VOO)
Apple Inc. (AAPL)
11.03%
Apple Inc. (AAPL)
6.66%
Microsoft Corp. (MSFT)
9.13%
Microsoft Corp. (MSFT)
5.28%
Amazon.com Inc. (AMZN)
7.55%
Amazon.com Inc. (AMZN)
4.36%
Facebook Inc. (FB)
3.57%
Facebook Inc. (FB)
2.06%
Tesla Inc. (TSLA)
2.91%
Tesla Inc. (TSLA)
1.68%
Alphabet Inc. (GOOGL)
2.86%
Alphabet Inc. (GOOGL)
1.65%
Alphabet Inc. (GOOG)
2.67%
Alphabet Inc. (GOOG)
1.60%
Visa Inc. (V)
1.94%
Berkshire Hathaway Inc. (BRK.B)
1.40%
Mastercard Inc. (MA)
1.72%
Johnson & Johnson (JNJ)
1.30%
NVIDIA Corp. (NVDA)
1.67%
JPMorgan Chase & Co. (JPM)
1.22%
45.05% of total net asset27.21% of total net assets
As of 31/12/2020
Source: advisors.vanguard.com

Top 10 Holdings in VUG makes up 45.05% of the total asset, which constitutes for almost half the index. Whereas top 10 in VOO only makes up 27.21% of the total asset. If you want a less concentrated top 10 profile, then VOO is the one to choose.

Are There Overlapping Counters Between These 2 ETFs?

Out of the 257 companies in VUG, 180 of these also exist in VTI. This means that only 77 companies are unique to VUG.

VUG vs VOO – Performance

Using the Portfolio Visualizer to back test these 2 ETFs, we can then compare the portfolio growth between Jan 2011 – Dec 2020. The time period was constrained by the available data for VOO (Vanguard S&P 500 ETF).

This is what you will end up with at the end of Dec 2020 if you have invest $10,000 in 2011.

VUG (Vanguard Growth ETF): $46,694
VOO (Vanguard S&P 500 ETF): $36,488

This works out to be 27% more returns if you have invested in VUG.

Because the data is constrained by Vanguard S&P 500 ETF, I ran another back test using Vanguard 500 Index Investor (VFINX), which is the oldest share class of the fund. I wanted to see if the longer time frame would made any difference in the return.

This is what you will end up with at the end of Dec 2020 if you have invest $10,000 in 2005.

VUG (Vanguard Growth ETF): $59,583
VFINX
(Vanguard 500 Index Investor): $42,297

Again we see similar results as with the 10 year period. By investing in VFINX, you will get 40% more returns compared to VOO.

Annual Returns

2018 was the only year that both ETFs return negative returns. VUG delivers a -3.31% vs VOO’s 4.5%. Surprisingly, VUG does slightly better in this downturn.

And also, we can see that VUG delivers better returns in 7 out of the 9 positive years whereas, VOO only perform better in 2011 and 2016.

Again, I wanted to see what the returns are like in 2008. So this is ran against VUG vs VFINX.

In 2008, VUG has a loss of -38.02% vs VFINX’s -37.02%. This time round VFINX does slightly better.

From both charts, they both deliver rather similar losses during downturns.

Annualized Returns

1 Year5 Year10 Year
VUG40.22%20.32%16.66%
VOO18.29%15.18%13.82%
Annualized Return ending in December 2020 

Summary

Based on past performance, VUG Vanguard Growth ETF seems to deliver a better return.

You get a 27% more in terms of portfolio growth in a 10 years period, and 40% more in a 15 years period. Both ETFs has similar drawdowns during down turns. Higher returns for a similar risk just makes more sense.

The question is would growth stocks continue to it’s upward trend in the future?

As we saw earlier, the Top 10 holdings in VUG makes up almost half the fund. Should anything happen to those holdings, they will greatly impact the returns on VUG. So for a more diversified portfolio, VOO might be a better choice here. A 13.82% 10 years annualized return is a great feat too.

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