VO vs VB: Understanding the Differences
LAST UPDATED: June 16, 2023 | By Conrad GollyIf you’re considering investing in ETFs, you might have come across Vanguard’s VO and VB funds. Both VO vs VB are popular ETFs that track different segments of the US stock market. VO tracks mid-cap stocks, while VB tracks small-cap stocks.
VO is the Vanguard Mid-Cap Index Fund ETF Shares, which invests in the stocks of medium-sized companies. The fund’s objective is to track the performance of the CRSP US Mid Cap Index, which represents the mid-cap segment of the US stock market.
On the other hand, VB is the Vanguard Small-Cap Index Fund ETF Shares, which invests in the stocks of small companies. The fund’s objective is to track the performance of the CRSP US Small Cap Index, which represents the small-cap segment of the US stock market.
VO vs VB – Overview
Choosing between VO and VB depends on your investment goals and risk tolerance. While mid-cap stocks can offer a balance between growth potential and stability, small-cap stocks can offer higher potential returns but come with higher risk.
It’s important to do your own research and understand the differences between the two funds before making any investment decisions.
In this section, we will compare VO vs VB to help you make an informed decision on which fund to invest in.
What’s The Difference?
One of the main differences between VO and VB is their fund composition. VO holds stocks in mid-cap companies, while VB holds stocks in small-cap companies. This means that VO has a higher exposure to the technology sector, while VB has a higher exposure to the healthcare sector.
Another difference is their expense ratio. VO has a lower expense ratio of 0.04%, while VB has an expense ratio of 0.05%. This may not seem like a big difference, but it can add up over time, especially if you are investing a significant amount of money.
VO vs VB – Fund Composition
As mentioned earlier, VO holds stocks in mid-cap companies, while VB holds stocks in small-cap companies. VO has a total of 357 holdings, with a median market cap of $30.2 billion, while VB has a total of 1,454 holdings, with a median market cap of $4.8 billion.
In terms of sector allocation, VO has a higher exposure to the technology sector, with 23.2% of its holdings in this sector. VB, on the other hand, has a higher exposure to the healthcare sector, with 19.9% of its holdings in this sector.
Credit Quality, Regional Allocation, Maturity
When it comes to credit quality, both VO and VB have a similar distribution. The majority of their holdings are rated A or higher, with only a small percentage of holdings rated below investment grade.
In terms of regional allocation, both funds have a similar distribution, with the majority of their holdings in the United States. VO has a slightly higher exposure to Canada, while VB has a slightly higher exposure to the United Kingdom.
Finally, both funds have a similar maturity distribution, with the majority of their holdings having a maturity of less than 10 years.
VO vs VB – Analysis
When it comes to investing in securities, it’s important to compare different options to find the best fit for your portfolio. Vanguard offers two popular ETFs: VO and VB. Here’s a breakdown of how they compare.
Volatility
One of the most important things to consider when investing is volatility. VO and VB have different levels of volatility, which can impact your investment performance. VO is a mid-cap blend fund, while VB is a small-cap blend fund.
Historically, small-cap stocks have been more volatile than mid-cap stocks. This means that VB may have higher volatility than VO. However, past performance doesn’t guarantee future results.
Drawdown
Drawdown is another important metric to consider. Drawdown measures the peak-to-trough decline in an investment’s value. This can help you understand how much you could potentially lose with an investment.
VB may have higher drawdowns than VO due to its higher volatility. However, it’s important to remember that past performance doesn’t guarantee future results.
When comparing VO vs VB, it’s important to consider your investment goals and risk tolerance. If you’re looking for higher growth potential, VB may be a better fit for you. However, if you’re looking for a more stable investment, VO may be a better option.
VO vs VB – Performance
When it comes to comparing VO vs VB, performance is a crucial factor to consider. Here, we’ll take a look at the annual returns and portfolio growth of both ETFs to help you make an informed decision.
Annual Returns
VO’s mean return is 0.01 points lower than VB’s, but its R-squared is 7.19 points higher. VO is slightly less volatile than VB, with a standard deviation of 15.65. The alpha and beta of VO are 1.31 points higher and 0.10 points lower than VB’s alpha and beta, respectively.
Portfolio Growth
When it comes to portfolio growth, VB has a lower 5-year return than VO, as per askfinny.com. However, both ETFs have the same expense ratio of 0.05%.
VB holds stocks in the small-cap range, while VO holds stocks below the large-cap US stocks, making it equivalent to the S&P 500 Index, according to seekingalpha.com.
Bottom Line: VO vs VB
When it comes to choosing between Vanguard’s VO and VB, the decision ultimately depends on your investment goals and risk tolerance. Here are some factors to consider before making a decision:
Market Capitalization
VO invests in mid-cap stocks, while VB invests in small-cap stocks. If you’re looking for exposure to smaller companies, VB may be the better choice. However, keep in mind that small-cap stocks tend to be more volatile than mid-cap stocks.
Diversification
Both VO and VB offer broad exposure to their respective market caps, which can help diversify your portfolio. However, it’s important to note that neither fund guarantees against losses.
Expense Ratio
VB has a slightly lower expense ratio than VO, which can be an important factor for investors looking to minimize costs. However, both funds have relatively low expense ratios compared to other ETFs.
Tax Implications
If you’re investing in a taxable account, it’s important to consider the tax implications of your investment. VO may be more tax-efficient than VB due to its lower turnover rate, which can help minimize capital gains taxes.
Tools and Resources
Vanguard offers a variety of tools and resources to help investors make informed decisions about their investments. This includes educational materials, investment calculators, and personalized advice from financial advisors.
Ownership
Both VO and VB are owned by Vanguard, which means investors can be confident in the quality of the funds and the company’s commitment to low-cost, passive investing.
World Events
It’s important to keep an eye on world events and how they may impact the stock market. This can include things like political instability, natural disasters, and economic trends.
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