VO vs VOE: A Comparison of Top Mid-Cap ETFs
LAST UPDATED: July 16, 2023 | By Conrad Golly
As an investor, I am always on the lookout for the best investment opportunities.
One of the most popular investment options is exchange-traded funds (ETFs).
Two popular ETFs are the Vanguard Mid-Cap ETF (VO) and the Vanguard Mid-Cap Value ETF (VOE).
While both VO and VOE are mid-cap ETFs, they have some key differences that investors should be aware of.
VO vs VOE: For example, VO is a passively managed fund that tracks the performance of the CRSP US Mid Cap Index, while VOE is actively managed and focuses on mid-cap value stocks. Additionally, VO has a lower expense ratio than VOE, making it a more cost-effective option for investors.
Both of these ETFs are managed by Vanguard, one of the largest investment management companies in the world.
What is VO vs VOE?
When it comes to investing in mid-cap stocks, Vanguard offers two popular exchange-traded funds (ETFs): Vanguard Mid-Cap ETF (VO) and Vanguard Mid-Cap Value ETF (VOE).
VO tracks the performance of the CRSP US Mid Cap Index, which includes mid-cap stocks of all types, while VOE tracks the CRSP US Mid Cap Value Index, which includes mid-cap value stocks.
Both ETFs are passively managed and offer low expense ratios, making them a popular choice for investors looking for a low-cost way to invest in mid-cap stocks.
One key difference between the two ETFs is their exposure to different sectors.
VO has a higher exposure to the technology sector, while VOE has a higher exposure to the financials sector.
Another difference is their performance over the past ten years.
VO has provided higher returns than VOE over this period.
Investors should carefully consider their investment goals and risk tolerance before deciding which ETF to invest in.
VO may be a better choice for those seeking exposure to the technology sector and higher returns, while VOE may be a better choice for those seeking exposure to the financials sector and potentially lower risk.
VO vs VOE How they are Used
VO vs VOE: What’s the Difference?
When it comes to investing in mid-cap stocks, investors have two options: Vanguard Mid-Cap ETF (VO) and Vanguard Mid-Cap Value ETF (VOE).
Both ETFs are designed to track the performance of the CRSP US Mid Cap Index, but there are some key differences between the two.
VO invests in mid-cap stocks that are considered growth stocks, while VOE invests in mid-cap stocks that are considered value stocks.
VO also has a higher exposure to the technology sector and a lower standard deviation. Overall, VO has provided higher returns than VOE over the past ten years.
When to Use VO
If you’re looking to invest in mid-cap stocks that are considered growth stocks, then VO may be the right choice for you.
VO has a lower expense ratio compared to VOE, which means you’ll pay less in fees over time.
Additionally, VO has a higher exposure to the technology sector, which is a sector that has seen significant growth in recent years.
If you believe that technology will continue to be a strong sector in the future, then VO may be a good option for you.
When to Use VOE
If you’re looking to invest in mid-cap stocks that are considered value stocks, then VOE may be the right choice for you.
VOE has a higher dividend yield compared to VO, which means you’ll receive more income from your investment.
VOE has a lower price-to-earnings ratio compared to VO, which means you’ll pay less for each dollar of earnings.
If you believe that value stocks will perform well in the future, then VOE may be a good option for you.
VO and VOE are both designed to track the performance of the CRSP US Mid Cap Index, but they invest in different types of mid-cap stocks.
VO is designed for investors who want exposure to mid-cap growth stocks, while VOE is designed for investors who want exposure to mid-cap value stocks.
When deciding which ETF to invest in, it’s important to consider your investment goals and your outlook on the market.
Examples of VO and VOE in Action
VO Examples
As an investor, I would consider buying VO if I wanted to invest in the US mid-cap market.
VO tracks the CRSP US Mid Cap Index, which includes companies with market capitalizations between $2 billion and $10 billion.
VO has a lower expense ratio of 0.04% compared to VOE’s 0.07%. Additionally, VO has a higher exposure to the technology sector, which has been performing well in recent years.
For example, as of March 31, 2023, VO’s top five holdings were ServiceNow, Adobe, Salesforce, Intuit, and Cadence Design Systems.
These companies have all seen significant growth in the past few years and are expected to continue to perform well in the future.
Investors who want to invest in mid-cap growth companies may also consider VO. VO has a higher exposure to growth companies than VOE, which has a higher exposure to value companies.
As of March 31, 2023, VO’s top three sectors were technology, healthcare, and consumer discretionary.
VOE Examples
If I were looking to invest in mid-cap value companies, I would consider buying VOE.
VOE tracks the CRSP US Mid Cap Value Index, which includes companies with market capitalizations between $2 billion and $10 billion that are considered undervalued by the market.
As of March 31, 2023, VOE’s top five holdings were Valero Energy, Occidental Petroleum, Marathon Petroleum, LyondellBasell Industries, and HollyFrontier Corporation.
Investors who are looking for income may also consider VOE. Many of the companies in VOE’s index are established companies that pay dividends.
As of March 31, 2023, VOE’s dividend yield was 2.97%, which is higher than VO’s dividend yield of 1.14%.
Investors who want to invest in mid-cap value companies but are concerned about the volatility of the stock market may also consider VOE.
VOE has a lower standard deviation than VO, which means that it may be less volatile during market downturns.
Advantages and Disadvantages of VO and VOE
Advantages of VO
I believe that VO has several advantages over VOE. Firstly, it has a lower expense ratio of 0.04%, which means I can save more on fees.
Secondly, it has a higher exposure to the technology sector, which is a growing industry that I believe will continue to perform well in the future.
Finally, VO has provided higher returns than VOE over the past ten years, which is an important factor to consider when investing.
Disadvantages of VO
However, I also recognize that VO has its disadvantages. O
ne major drawback is that it only invests in mid-cap stocks, which means that it may not provide enough diversification for some investors.
Additionally, it may be more volatile than VOE due to its focus on mid-cap stocks, which can be riskier than large-cap stocks.
Advantages of VOE
On the other hand, I also see several advantages to investing in VOE.
Firstly, it has a higher expense ratio of 0.07%, but it invests in a broader range of mid-cap value stocks, which may provide more diversification.
Additionally, it may be less volatile than VO due to its focus on value stocks, which can be more stable than growth stocks.
VOE may be a better option for investors who prefer a more conservative investment approach.
Disadvantages of VOE
However, VOE also has its disadvantages. One major drawback is that it has a lower exposure to the technology sector, which may limit its potential for growth.
It has provided lower returns than VO over the past ten years, which may be a concern for investors who prioritize returns over stability.
Verdict: VO vs VOE
After analyzing the various factors that differentiate VO and VOE, I have come to the conclusion that both ETFs have their own strengths and weaknesses.
The choice between the two comes down to the investor’s goals and preferences.
For investors seeking higher returns and are willing to take on more risk, VO may be the better option.
With a higher exposure to the technology sector, VO has provided higher returns than VOE over the past ten years.
VO has a lower expense ratio than VOE, making it a more cost-effective option.
On the other hand, for investors seeking a more stable investment with a higher dividend yield, VOE may be the better choice.
VOE has a higher dividend yield than VO and a lower standard deviation, which may be more appealing to risk-averse investors.
It is also worth noting that both ETFs have a similar composition, with both investing in mid-cap stocks.
However, VOE has a higher exposure to value stocks, while VO has a higher exposure to growth stocks.
Both VO and VOE are solid investment options for those looking to invest in mid-cap stocks. It ultimately comes down to the individual investor’s risk tolerance and investment goals.
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