Baby investor here who literally just started a couple of months ago.. me and my husband have a disagreement. He wants to only put into VOO. And I was to diversify more and put in VTI, VXUS, and bonds. Who’s right or are we both wrong. Any knowledge would help thank you.
VTI or VOO , which is better
byu/Pleasant-Trouble-784 ininvesting
Posted by Pleasant-Trouble-784
22 Comments
You’re both right.
Both are excellent funds. They are very closely correlated.
I prefer VTI because I want to own everything. But I also wouldn’t hesitate to choose VOO if that’s what I had access to.
There is no right or wrong as one cannot know the future. VTI gives you exposure to the total US market. VOO only gives to top 500 US companies. VXUS gives exposure to the rest of the world. Those who look at the past decade will say invest in VOO. Those who invested in the “lost decade”, will suggest diversifying across the world. Bonds are different and have a dampening effect on your portfolio.
Whatever you decide, important thing is to stick with your asset allocation target. On good and bad times. Rebalance every year. Do not chase performance. Simplicity will be your best friend. Check out r/Bogleheads.
Either/Or
>He wants to only put into VOO
What’s his reasoning? Nobody’s wrong because you just listed 2 wants.
>VTI, VXUS, and bonds.
Are you saying you will either do VOO/VXUS/bonds, VTI/VXUS/bonds, or only VOO?
Well what’s your definition of “better”?
VOO has performed better because it’s more heavily weighted towards the big tech companies who buoy the market.
VTI is more diversified, if you think that’s better. But it’s still heavily weighted towards the large cap companies, so the difference from VOO is negligible, at least in the eyes of a baby investor.
I think it’s definitely worth it to have some VXUS given the uncertainty in US markets. But again, is it “better” than VOO? Performance wise, no.
And bonds, depends on your age, risk tolerance and goals.
VT
Not better or worse, they are simply apples and oranges.
Bonds bad gold better look at a 60/40 stock bond portfolio. It’s not a good look. My view is diversification is good if the instruments are not very correlated and both perform well. Just quick glancing at charts VXUS looks good and gives diversification into international stocks. VOO VXUS Gold I think would a be pretty solid long term portfolio. Cash in USFR or BOXX. NFA
Just buy VT.
If you are truly a baby investor, you should buy VOO on an auto weekly basis. Whatever you can afford. Then work to increase that weekly. Then only sell if you have an urgent expense to pay for.
SGOV for emergency funds and large expenses to be paid for in one year or less.
What you’re suggesting is a more balanced approach. And that’s great, but I’ve never seen someone new do a balanced approach with max effort. I have seen noobs get VOO and chill right (tons get it wrong too mind you).
How do I know this balanced approach wasn’t max effort? Because they set it up 10 years ago and never progressed. They invested $100/week 10 years ago, doing the same now. I have seen people increase their VOO and chill.
You will tinker with allocations, and play panic sell games with “rebalancing” and other fancy rationalizations.
The fear with VOO and chill is that you might panic sell. The fear with balanced approach is that you might not progress due to having a complicated setup.
A balanced approach is good to help with emotions during volatility. Volatility is a feature to the auto investor.
You might not truly grasp the things I’m saying. And that’s ok. Rome wasn’t built in a day. Best of luck either way!!
Really won’t go wrong either is fine
Pick one:
1. VOO/VXUS
2. VTI/VXUS
3. VT
You don’t need bonds imo.
You can use them to smooth out volatility if you’re worried about the ups and downs but they’ll hinder your long term performance if you’re 10+ years from retirement.
I prefer VTI over VOO because you own more for the same exact expense ratio. I also have VXUS to hold international. People say it’s the same but holding VTI + VXUS, and eventually adding bonds, is a full, complete and sensible portfolio.
VOO is not bad, but it’s 100% US and only s&p 500 so your pool (and exposure) is much, much smaller.
I’m short, you are right.
I hold both VOO and VTI in a retirement account. I skew more towards VOO than VTI but I like owning both. Just adding the idea that it’s not necessarily an either/or choice.
I dont think the extra stuff that VTI owns adds much value. If anything the smaller cap stocks are of lower fundamental quality/more frauds than large caps.
Either way though, a dollar into either today is a bet on tech with nearly 40% weights
You can’t really go wrong with either of these, but here’s some things to consider:
Pros of VOO:
-marginally simpler to manage since you won’t have to rebalance
-the S&P 500 (which VOO tracks) has profitability and other inclusion criteria that make it have (arguably) higher quality companies than a total market index.
Arguments against VOO: the current market is heavily weighted towards US large cap tech, which have considerably outperformed in the last 20 years compared to large caps historically. Will this outperformance continue? That’s anyone’s guess.
Pros of VTI:
-diverse holdings that are likely to appreciate even if large cap tech fails to deliver over the next 10-20 years.
Arguments against:
-there’s an argument that total market funds are over diversified. In other words, you waste a portion of your portfolio on the bottom of the barrel companies. It’s not a huge portion since this is market cap weighted, but still. You’d probably be better off with VOO and a small cap index like IJR (S&P small cap index with profitability requirements and exclusion criteria). You get the benefits of diversification and probably a smaller drop in expected returns.
Pros of Bonds:
-If you are planning on retiring in the next 10-15 years, maybe even 20, then bonds can be a great tool in your portfolio. They will lower your returns when compared to 100% stocks, but they will raise your risk adjusted returns when mixed in. So you will make a more consistent, but modest return on your money whereas stocks alone will give a bit of a roller coaster that climbs higher in the end.
Cons of bonds:
-they lower your expected returns. If you are comfortable taking on more risk, 100% stocks is a better allocation if you’re young and plan to work for 30 more years (and assuming you have the risk tolerance to not panic sell during a downturn. Easier said than done, but very doable).
A couple financial principles:
-Diversification typically lowers your expected returns, but typically RAISES your risk adjusted returns. Meaning, you’re likely to have lower returns but you’re you have a tighter spread of possible returns. I.e. if you invest in Google, you might expect an annualized return over 10 years of say 15%. But it’s entirely conceivable that a disruptor like ChatGPT takes a lot of their business and Google returns -30% over that time. A portfolio of 10 companies has significantly lower downside risk, but also less upside potential. Meaning your expected returns may only be 10%, but you’re much more likely to hit that 10% then Google is to hit their 20%. Hopefully that makes sense.
-the positive effects of diversification are realized with a relatively small basket of companies. Surprisingly, just 30 companies is usually sufficient to eliminate most idiosyncratic (company specific) risk. In my opinion, there’s not a huge benefit of diversifying beyond the S&P 500 unless you’re taking about international markets. VTI just has lower returns than VOO over many years and a pretty similar risk profile.
My recommendation:
Set an auto buy for VOO with the max you can afford every paycheck. If diversification keep you up at night, do a 70/30 split between VOO/VXUS. Can even go up to 50/50 if you’re not bullish on US business for the next 30 years, but I’m bullish on the US. Ignore VTI, it’s basically the same as VOO but with more bloat you don’t need.
Longterm historical data demonstrates that diversification outperforms S&P500 only (Fama French). Meanwhile, we are living in one of the most successful runs of the S&P500. Until the start of 2025, discussion on Reddit was all about “VOO and chill”. Over the last year, however, international equities has meaningful outperformed the S&P500 and this may very well represent a transition in equity dominance from U.S. to international. Time will tell. S&P500 up 17.2% YTD, Total International Equity up 34.2% YYD (AVDE), and International Small Cap Equity up 44% YTD (AVDV). This past year was a strong lesson to me regarding the importance of diversification. VOO is a fine fund and a very reasonable portfolio investment. I think there is strong argument to broaden to include VTI and/or VXUS. Good luck!
VGT
Voo is very popular and so is vti
I have vti
you are right, but its quite possible he could be lucky and VOO (US Large Caps) could outperform Internantional and the wider US Market over the next x years.
If ‘highest return over the last x years is his rational why isn’t he arguing for 100% Nividia or Bitcoin?
Nobody knows the future. There is no right answer. We will only know in hindsight.