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Voo vs vti

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  • Voo vs vti

    I know the technical difference as voo is the snp 500 index while vti is the total stock market index

    my question is why is it that vti is slightly more volatile (very slightly) than voo? I would think that the total stock market is less susceptible to change than the snp 500


  • #2
    Just guessing that since S&P only includes the “top” 500 companies it is more stable/less susceptible to fluctuations than an index that also contains mid-cap and small-cap funds that are more volatile.

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    • #3
      ^^^ Agree. Small cap indices tends to jump all over the place. Mix small cap with some S&P500 & sprinkle with mid-cap & you'd see the VTI trends.
      "Oh look another bajillion point declin-Ooooh!!! A coupon for pizza!!!!" <--- This is what everyone's IPS should be. ✓✓✓

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      • #4
        Why not VT?

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        • #5
          VTI contains many more stocks than VOO. The small and mid cap stocks in VTI slightly more volatile and more risky than VOO but also will theoretically result in higher returns over the length of a many-decades investing career.

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          • #6
            VTI has about 3500 holdings. VOO is functionally included in VTI and accounts for about 80% of the total value. So the more volatile mid and small cap stock holdings will very modestly affect the total return of VTI since it only comprises the remaining 20%.

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            • #7
              Originally posted by MichaelGaryScott View Post
              VTI contains many more stocks than VOO. The small and mid cap stocks in VTI slightly more volatile and more risky than VOO but also will theoretically result in higher returns over the length of a many-decades investing career.
              This is not true at all. The number of stocks is irrelevant when it is market weighted. The 2875th biggest company having great growth won't help you when you own virtually zero of it compared to the top 100. It will simply be balanced out by the fact that the 1097th went bankrupt and the 1843rd and 3175th had poor sales.

              Any small and mid caps which do well and get big simply become part of S&P 500 (VOO) soon enough anyways (once they hit around $10B market cap). Any failures or floundering ones stay in VTI only, and there are many more small cap failures than next Apple or Amazon... so it will essentially balance out. Think of it like having major league baseball or majors + minors. A few minors guys will rocket up and make majors, but thousands of others will putter along and never contribute much meaningful stats to the game.

              The two funds/indexes are 80% similar in content (S&P 500 makes up 80% of total US market cap, and these funds are market weighted) and they have and will continue to be 80% or more similar (nearly identical in actuality) in total return results for any long term period. As was said above, the numerous Reits and small caps in VTI and the many failed companies results in slightly more dividend and more volatility. Long term, that's pretty inconsequential. Can't go wrong with either. They both achieve very wide diversity and very low ER.

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