Investing in exchange-traded funds (ETFs) has become a popular way for individuals to gain exposure to a diversified portfolio of stocks.
Vanguard, one of the world’s largest investment management companies, offers a range of ETFs that provide investors with exposure to various sectors and industries.
In this article, we will compare two of Vanguard’s popular ETFs, VTI and VXF, and analyze their fund composition, industry exposure, and performance over the past decade to help investors make informed decisions when choosing between the two.
Key Takeaways VTI Vs VXF
- VTI and VXF are both Vanguard ETFs in the Top 100, but differ in their fund composition and industry exposure.
- VTI has a lower expense ratio and higher exposure to the technology sector, while VXF has provided higher returns than VTI over the past decade and a higher compound annual growth rate (CAGR).
- Both funds have low expense ratios and moderate returns in most years, with occasional strong or poor performances.
Fund Composition Differences VTI Vs VXF
In terms of their fund composition, VTI and VXF differ significantly. VTI, being a Large Blend fund, has a higher exposure to the technology sector, which accounts for nearly 27% of its holdings.
On the other hand, VXF, being a Mid-Cap Growth fund, has more exposure to real estate, consumer defensive, and basic materials, which account for nearly 16%, 14%, and 12% of its holdings, respectively.
A top holdings analysis reveals that VTI’s top holdings include tech giants such as Apple, Microsoft, and Amazon, which make up a significant portion of the fund’s assets.
In contrast, VXF’s top holdings include Square, Zoom, and Uber, which are relatively smaller companies. Additionally, a sector allocation comparison shows that VTI is more exposed to the technology sector, while VXF has more exposure to Communication Services and Industrials stocks.
These fund composition differences indicate that investors seeking exposure to a specific sector or industry may prefer one over the other.
Industry Exposure Variance VTI Vs VXF
The levels of exposure to different industries vary between the two funds being analyzed, VTI and VXF. VTI has a higher exposure to the technology sector, while VXF has more exposure to Real Estate, Consumer Defensive, and Basic Materials. The table below shows the top five industries for both funds, based on their respective weightings:
As shown in the table, VTI has a much higher weighting in the technology sector, with a 24.51% exposure compared to VXF’s 6.82%. In contrast, VXF has a higher weighting in Real Estate, Consumer Defensive, and Basic Materials.
These differences in industry exposure can be important for investors who are looking to diversify their portfolios and gain exposure to specific sectors. For example, if an investor is bullish on the technology sector, they may prefer VTI over VXF, while an investor who is interested in Real Estate may prefer VXF.
It is important to note that while VTI and VXF have different levels of exposure to certain industries, both funds have provided moderate returns in most years, with occasional strong or poor performances.
Additionally, both funds have low expense ratios, making them attractive options for investors looking for cost-effective ways to gain exposure to the stock market.
Performance Comparisons VTI Vs VXF
Performance comparisons between the two Vanguard ETFs, VTI and VXF, can provide investors with valuable insights into their historical returns and potential for future growth.
When analyzing the historical performance trends of the two funds, it is important to take into account their expense ratios. VTI has a lower expense ratio than VXF, which can have a significant impact on overall returns over time.
Despite VXF’s higher expense ratio, it has provided higher returns than VTI over the past decade. This may be due to VXF’s exposure to the mid-cap growth sector, which has outperformed large-cap stocks in recent years.
However, it is important to note that both funds have provided moderate returns in most years, with occasional strong or poor performances. Investors should consider their individual investment goals and risk tolerance when deciding between VTI and VXF.
Overview of VTI and VXF ETFs
Let’s take a closer look at the VTI and VXF ETFs, two popular investment options that offer a broad overview of the US stock market.
While both ETFs aim to provide investors with exposure to the US stock market, there are some key differences to note.
When it comes to comparison, VTI is a total stock market ETF, meaning it holds all stocks in the US stock market, including small, mid, and large-cap stocks. On the other hand, VXF is a mid-cap ETF, meaning it only holds mid-cap stocks.
This means that VTI provides a more diversified investment option, while VXF offers more targeted exposure to mid-cap stocks.
In terms of performance metrics, VTI has historically outperformed VXF, as it is more diversified and contains a larger number of stocks.
However, VXF may have the potential to provide higher returns in the long run, as mid-cap stocks have historically outperformed large-cap stocks over longer periods of time.
Differences in Objectives
Understanding the divergent aims of VTI and VXF can help you make informed investment decisions that align with your financial goals.
While both ETFs track the performance of the US stock market, they differ in their investment strategies and objectives.
VTI seeks to replicate the performance of the CRSP US Total Market Index, which includes a broad range of stocks across all sectors and market capitalizations. This ETF aims to provide investors with exposure to the entire US stock market, making it a suitable option for those seeking diversified exposure.
On the other hand, VXF tracks the performance of the S&P MidCap 400 and S&P SmallCap 600 indices, which include smaller companies in the US market. As a result, VXF may offer higher potential returns but also comes with greater risk.
Understanding these differences in investment objectives can help you choose the ETF that aligns with your investment goals and risk tolerance.
Differences in Diversification
To diversify your investment portfolio, you may want to consider an ETF that tracks a broad range of stocks across all sectors and market capitalizations. This is where the Vanguard Total Stock Market ETF (VTI) and the Vanguard Extended Market ETF (VXF) differ in their diversification.
VTI includes large, mid, and small-cap stocks from all sectors, providing a comprehensive portfolio allocation. On the other hand, VXF focuses solely on mid and small-cap stocks, excluding large-cap companies.
This means that VTI provides more exposure to large-cap stocks while VXF offers more industry exposure to mid and small-cap companies. When considering your investment goals and risk tolerance, it is important to understand how each ETF’s diversification aligns with your portfolio needs.
Benefits and Risks of Investing in VTI and VXF
Investing in both VTI and VXF can offer a range of benefits and risks that you should consider before making any investment decisions.
Let’s start with the pros. VTI, being a total stock market ETF, provides a diversified exposure to the entire U.S. stock market. This means that you have access to a broad range of sectors and companies, which can help reduce portfolio risk.
On the other hand, VXF, being a mid-cap and small-cap ETF, provides exposure to smaller companies that have the potential for higher growth than larger, more established companies.
By investing in VXF, you can take advantage of this growth potential, and potentially earn higher returns than investing solely in larger companies.
Now, let’s talk about the cons. VTI may have a larger exposure to companies that are already well-established, which means that there may be less potential for growth compared to VXF. Additionally, VXF may be more volatile than VTI, which can lead to higher risk.
When it comes to performance comparison, both VTI and VXF have performed well over the long term, but it’s important to keep in mind that past performance is not a guarantee of future results.
Considerations for Choosing Between VTI and VXF
When deciding which ETF to add to your portfolio, it’s important to weigh the potential benefits and risks of each option. Here are some considerations to keep in mind when choosing between VTI and VXF:
- Expense ratios: VTI has a slightly lower expense ratio than VXF, which could mean greater long-term savings for investors.
- Tax implications: VXF’s focus on mid- and small-cap stocks could lead to higher tax implications due to higher turnover within the fund. VTI’s broader exposure to large-cap stocks may lead to lower tax implications.
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Bottom Line: VTI Vs VXF
Now that you’ve got a better understanding of the differences between VTI and VXF ETFs, it’s important to consider which one is the best fit for your investment goals.
If you’re looking for a more diversified approach to investing in the overall U.S. stock market, VTI may be the better choice. On the other hand, if you’re looking to focus on mid-cap and small-cap stocks, VXF may be the way to go.
It’s also important to remember that both VTI and VXF come with their own set of benefits and risks. It’s crucial to do your own research and assess your risk tolerance before investing in either ETF.
By understanding the differences between VTI and VXF, and considering your own investment goals and risk tolerance, you can make an informed decision on which one to choose for your portfolio.
Before you go…
Frequently Asked Questions
What Is The Historical Performance Of VTI And VXF Compared To Other Similar ETFs?
You want to know about the historical performance of ETFs similar to VTI and VXF. Performance comparisons and market trends analysis reveal insights into the relative success of these funds over time.
How Do VTI And VXF Compare In Terms Of Fees And Expenses?
When comparing ETFs, it’s important to consider expense ratios and investment minimums. These expenses can vary greatly between funds and impact your overall returns.
Are There Any Tax Implications For Investing In VTI Or VXF?
When choosing between VTI and VXF, don’t forget to consider the tax implications. Generally, VTI is better for long-term investment strategies due to its lower turnover rate and lower tax burden.
Can VTI And VXF Be Used For Short-Term Trading Or Are They Primarily For Long-Term Investing?
If you’re considering day trading strategies with VTI or VXF, keep in mind that both are primarily designed for long-term investing. That being said, effective risk management techniques can help minimize losses during short-term trades.
Are There Any Restrictions Or Limitations On Who Can Invest In VTI Or VXF?
Investment eligibility for VTI and VXF is open to most individuals, including U.S. citizens and non-U.S. residents. Accessibility options vary by brokerage, but both funds are widely available for investment.
What Is The Minimum Investment Required For VTI And VXF?
The minimum investment required for VTI and VXF varies depending on the brokerage firm used.
However, both funds generally have low minimum investment requirements, making them accessible to investors with small amounts of capital. Pros of small investments include lower risk and easier diversification, while cons include lower potential returns.
Are VTI And VXF Suitable For Long-Term Investments?
Both VTI and VXF can be suitable for long-term investments, but with different benefits. VTI offers portfolio diversification and exposure to the technology sector, while VXF has provided higher long term returns.
What Is The Historical Volatility Of VTI And VXF?
Comparing returns and evaluating risk, VTI and VXF have shown moderate returns with occasional strong or poor performances.
Analyzing market trends, historical performance suggests VXF has higher returns but a higher standard deviation than VTI.
Are There Any Tax Implications When Investing In VTI Or VXF?
Both VTI and VXF are tax-efficient investments, which can assist in creating a successful investment strategy. Careful consideration of tax implications when investing in these ETFs can lead to greater returns and overall financial success.
How Do VTI And VXF Compare To Other Vanguard ETFs?
When comparing to other Vanguard ETFs, VTI and VXF stand out with their low expense ratios and sector allocations. VTI has higher exposure to technology, while VXF has more exposure to real estate, consumer defensive, and basic materials.
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