VTI Vs VB: Which Vanguard ETF Is Right For You?
LAST UPDATED: June 10, 2023 | By Conrad Golly
If you’re looking for a cost-effective and diversified way to invest in the stock market, Vanguard ETFs might be a good option for you. Two of the most popular Vanguard ETFs are VTI and VB.
VTI is a large-cap blend ETF that tracks the performance of the CRSP US Total Market Index. This means that VTI invests in a broad range of companies across all sectors and industries, giving you exposure to the entire US stock market. On the other hand, VB is a small-cap blend ETF that tracks the performance of the CRSP US Small Cap Index.
This means that VB invests in smaller companies with a market capitalization of less than $2 billion, giving you exposure to the small-cap segment of the US stock market. By the end of this article, you should have a better understanding of which Vanguard ETF is the best fit for your investment portfolio.
Key Takeaways
- VTI and VB are two popular Vanguard ETFs that offer exposure to the US stock market, but they have some key differences that investors should consider before making an investment decision.
- VTI invests in a broad range of companies across all sectors and industries, while VB invests in smaller companies with a market capitalization of less than $2 billion.
- When deciding which Vanguard ETF is right for you, it’s important to consider your investment goals, risk tolerance, and investment time horizon.
VTI Vs VB – Overview
If you’re looking to invest in the stock market through an ETF, Vanguard offers two popular options: the Vanguard Total Stock Market ETF (VTI) and the Vanguard Small-Cap ETF (VB).
In this section, we’ll give you an overview of these two funds and help you decide which one might be right for you.
What’s The Difference?
The main difference between VTI and VB is the type of stocks they hold. VTI tracks the performance of the CRSP US Total Market Index, which includes large, mid, and small-cap U.S. companies.
On the other hand, VB tracks the performance of the CRSP US Small Cap Index, which includes only small-cap U.S. companies.
VTI is a large blend fund, meaning it holds a mix of growth and value stocks, while VB is a small blend fund, meaning it also holds a mix of growth and value stocks but only in the small-cap market sector.
Index
VTI and VB both track CRSP indices, which are designed to measure the performance of the U.S. stock market. The CRSP US Total Market Index includes more than 3,500 stocks, while the CRSP US Small Cap Index includes more than 1,500 stocks.
Expense Ratio
VTI has an expense ratio of 0.03%, while VB has an expense ratio of 0.05%. This means that for every $10,000 you invest in VTI, you’ll pay $3 in fees annually, while for VB, you’ll pay $5 in fees annually.
Issuer
Both VTI and VB are issued by Vanguard, one of the largest investment management companies in the world. Vanguard is known for its low-cost index funds and ETFs, making it a popular choice for long-term investors.
VTI Vs VB – Fund Composition
When deciding between VTI and VB, it’s important to consider their fund compositions. VTI is a Vanguard Total Stock Market ETF, which means it tracks the performance of the CRSP US Total Market Index.
This index includes large, mid, and small-cap stocks across all sectors, making it a broadly diversified option for investors.
On the other hand, VB is a Vanguard Small-Cap ETF, which tracks the performance of the CRSP US Small Cap Index. This index includes only small-cap stocks, making it a more focused option for investors.
VTI has over 3,500 holdings, while VB has around 1,500 holdings. This means that VTI offers more exposure to a wider range of companies, while VB is more concentrated in a smaller number of companies.
It’s also worth noting that VTI has a much larger asset base than VB, with over $2 trillion in assets under management compared to VB’s $35 billion. This can impact the liquidity and trading volume of the ETFs, which is something to keep in mind when making your investment decision.
Both VTI and VB are index funds that replicate their benchmark index, meaning they aim to closely match the performance of their respective index. However, due to their different compositions, they may perform differently in different market conditions.
If you’re looking for a broadly diversified option that includes large-cap stocks, mid-cap stocks, and small-cap stocks across all sectors, VTI may be the better choice for you.
However, if you’re looking for a more focused option that includes only small-cap stocks, VB may be the way to go. Ultimately, the decision comes down to your investment goals and risk tolerance.
Credit Quality
When it comes to credit quality, VTI and VB have some differences. VTI invests in companies with investment-grade credit ratings, while VB invests in companies with lower credit ratings, including some below investment grade.
This means that VB may have a higher risk of default, but it also offers higher potential returns.
If you are looking for a more conservative investment with less risk, VTI may be the better choice for you. However, if you are willing to take on more risk in exchange for potentially higher returns, VB may be the way to go.
It is important to note that both VTI and VB have a diversified portfolio of stocks, which helps to mitigate risk. Additionally, Vanguard has a strong reputation for managing risk and selecting high-quality investments.
When considering credit quality, it is also important to look at the expense ratios of each ETF. VTI has a slightly lower expense ratio than VB, which means that you will pay slightly less in fees for VTI.
However, the difference in expense ratios is relatively small and should not be the only factor you consider when choosing between these two ETFs.
Regional Allocation
When it comes to regional allocation, VTI and VB have some differences. VTI is designed to track the performance of the entire U.S. stock market, including large, mid, and small-cap stocks. On the other hand, VB focuses exclusively on small-cap stocks in the U.S.
Here’s a breakdown of the regional allocation for each ETF:
VTI
- U.S. Large Cap: 75.1%
- U.S. Mid Cap: 12.8%
- U.S. Small Cap: 12.1%
VB
- U.S. Small Cap: 100%
As you can see, VB is more concentrated in the small-cap sector of the U.S. stock market, while VTI has a more diversified allocation across large, mid, and small-cap stocks.
It’s important to consider your investment goals and risk tolerance when choosing between VTI and VB. If you’re looking for exposure to the entire U.S. stock market, VTI may be the better choice. However, if you’re comfortable with a more concentrated small-cap allocation, VB could be a good option.
Keep in mind that both ETFs are designed to be long-term investments, so it’s important to have a well-diversified portfolio that aligns with your investment goals and risk tolerance.
Maturity
When it comes to choosing between VTI and VB, one factor to consider is the maturity of your investment portfolio. VTI is a large-cap blend ETF, while VB is a small-cap blend ETF. This means that VTI invests in larger companies with a more established track record, while VB invests in smaller companies that are still growing.
If you have a long-term investment horizon and are looking for a more stable investment, VTI may be the better choice for you. Large-cap companies tend to be more established and have a history of steady growth, making them a safer bet in the long run.
However, if you have a shorter investment horizon and are willing to take on more risk, VB may be a better choice. Small-cap companies have more room to grow and can potentially offer higher returns, but they also come with more risk.
Another factor to consider is the current market conditions. In a bull market, when the economy is doing well and stocks are generally rising, small-cap companies tend to outperform large-cap companies. In a bear market, when the economy is struggling and stocks are generally falling, large-cap companies tend to hold up better. Keep this in mind when choosing between VTI and VB.
VTI Vs VB – Analysis
If you’re trying to decide between Vanguard Total Stock Market ETF (VTI) and Vanguard Small-Cap ETF (VB), it’s important to understand the differences between the two funds. Here’s an analysis to help you make an informed decision.
Volatility
VTI is a large-cap ETF, which means it invests in companies with a market capitalization of over $10 billion. This makes it less volatile than VB, which is a small-cap ETF that invests in companies with a market capitalization between $300 million and $2 billion. Small-cap stocks tend to be more volatile than large-cap stocks, so VB is likely to have higher fluctuations in price.
Drawdown
VTI has a lower maximum drawdown than VB, which means it has historically experienced smaller losses during market downturns. This is likely due to the fact that VTI invests in a broader range of stocks, including large-cap stocks, which tend to be more stable during market downturns.
When it comes to performance, VTI has historically outperformed VB. Over the past 10 years, VTI has had an average annual return of 14.01%, while VB has had an average annual return of 12.34%. However, past performance is not a guarantee of future returns.
Both VTI and VB are passively managed ETFs that track broad market indexes. VTI tracks the CRSP US Total Market Index, which includes over 3,500 stocks, while VB tracks the CRSP US Small Cap Index, which includes over 1,500 stocks. This means that both funds provide broad diversification across different market sectors.
VTI has an expense ratio of 0.03%, which is one of the lowest expense ratios among all ETFs. VB has a slightly higher expense ratio of 0.05%. However, both funds are considered low-cost options for investors.
If you’re looking to diversify your portfolio, both VTI and VB can be good options. VTI provides exposure to the entire U.S. stock market, while VB provides exposure to small-cap stocks. It’s important to consider your investment goals and risk tolerance when making a decision between the two.
VTI Vs VB – Performance
When deciding between VTI and VB, it’s important to consider their performance. Here’s a breakdown of their annual returns and portfolio growth.
Annual Returns
VTI and VB have both shown strong historical performance. VTI has had an average annual return of 9.82% over the past 10 years, while VB has had an average annual return of 10.08% over the same period. However, past performance does not guarantee future returns, so it’s important to keep that in mind when making your decision.
Portfolio Growth
Both VTI and VB offer broad diversification across the U.S. stock market, with VTI tracking the entire U.S. stock market and VB focusing on small-cap stocks. VTI has over 3,500 holdings, while VB has over 1,400 holdings, providing exposure to a wide range of sectors and market sectors.
VTI has a higher expense ratio of 0.03% compared to VB’s 0.05%, but both are low-cost options for investors looking to diversify their portfolio. VTI has more assets under management (AUM) at over $1 trillion compared to VB’s $45 billion, but both funds have economies of scale that help keep expenses low.
When it comes to making a decision between VTI and VB, it ultimately depends on your personal investment goals and risk tolerance. VTI may be a better option for long-term investors looking for broad diversification across the entire U.S. stock market, while VB may be a good choice for those looking to focus on small-cap stocks.
Remember, it’s important to do your own research and consult with a financial advisor before making any investment decisions.
Bottom Line: VTI Vs VB
When it comes to choosing between VTI and VB, it ultimately depends on your investment goals and risk tolerance. Here are some more key takeaways to consider:
- VTI is a large-cap blend fund that tracks the entire U.S. stock market, while VB is a small-cap blend fund that tracks the performance of small-cap stocks.
- VTI has a larger market capitalization and is more diversified than VB, which means it is generally less volatile. However, VB has the potential for higher returns due to the increased risk associated with small-cap stocks.
- If you are looking for a long-term investment with lower risk and steady returns, VTI may be the better choice. On the other hand, if you are willing to take on higher risk for the potential of higher returns, VB may be the better option.
- Both funds have low expense ratios and are suitable for investors who want to minimize fees and expenses.
Before you go…
Investment Opportunities
Investment opportunities in real estate and startups are discussed in the article.
Real estate investing has been a popular option for many investors seeking diversification and passive income. Groundfloor is a platform that allows investors to invest in short-term, high-yield real estate debt with a current return of 10% and a minimum investment of $10.
Investing in real estate and startups can provide diversification and potential for high returns, but it is important to carefully consider the risks and do thorough research before investing.
Frequently Asked Questions: VTI Vs VB
Are there any differences in the dividend yields of VTI and VB?
Comparing dividend yields, VTI has a current yield of 1.39% and VB has a current yield of 1.19%. Performance differences between VTI and VB include VTI having higher returns and more exposure to technology, financial services, and healthcare sectors, while VB has more exposure to industrials and real estate.
