Finance

Unveiling Vanguard ETF Strategies: Which Fund, VOO or VTI, Best Fits Your Portfolio Amidst Market Concentration?

Vanguard’s VOO tracks the S&P 500, while VTI offers broader US market exposure; both have low fees.

byAndres Castro

November 17, 2025, 9:20 AM

The logo for Vanguard, a major investment and brokerage services company, on a smartphone. By Evolf / Shutterstock.com.

Executive Summary

Vanguard’s VOO and VTI ETFs both offer broad U.S. market exposure with identical ultra-low expense ratios of 0.03%.

VTI provides greater diversification with 3,529 holdings across the total U.S. stock market, including small and mid-caps, compared to VOO’s 504 S&P 500 holdings.

Amid increasing market concentration in large-cap technology stocks, the choice between VOO (higher tech exposure) and VTI depends on an investor’s existing portfolio composition and diversification objectives.

The Story So Far

The increasing concentration of the U.S. stock market in large-cap companies, particularly within the technology sector, has made the distinct diversification approaches of Vanguard’s S&P 500 ETF (VOO) and Total Stock Market ETF (VTI) especially pertinent for investors. While both funds offer ultra-low expense ratios, VOO focuses on the 500 largest companies, whereas VTI provides broader exposure across the entire U.S. equity market, prompting investors to consider their specific portfolio needs in this concentrated market landscape.

Why This Matters

The increasing concentration of the U.S. stock market in a few large-cap companies highlights a critical decision for investors seeking broad market exposure. While Vanguard’s VOO offers a concentrated bet on the S&P 500, VTI provides significantly greater diversification across thousands of U.S. companies, including mid and small-caps, potentially offering more resilience and reduced reliance on the performance of a handful of tech giants. This choice impacts overall portfolio diversification and risk exposure, particularly for those already heavily invested in large-cap stocks.

Who Thinks What?

Investors seeking broader market exposure across U.S. equities, including mid-cap, small-cap, and micro-cap stocks, may find VTI a better fit due to its greater diversification and slightly lower concentration in large-cap technology and communications sectors.

Investors whose portfolios lack substantial exposure to large-cap stocks or who prioritize S&P 500 performance may benefit from VOO’s more concentrated nature, focusing on the 504 largest U.S. companies.

Market data indicates a growing concentration in the U.S. stock market’s largest companies, particularly within the technology sector, with the S&P 500 now representing 84% of total U.S. market capitalization.

Vanguard’s S&P 500 ETF (VOO) and Total Stock Market ETF (VTI) offer distinct approaches to broad market exposure, with the latter providing greater diversification across U.S. equities. Both funds maintain identical ultra-low expense ratios, prompting investors to consider their specific portfolio needs amidst increasing market concentration in large-cap stocks.

Market Concentration Trends

The U.S. stock market has seen a growing concentration in its largest companies in recent years, particularly within the technology sector. Data from September 30 indicates that the S&P 500 now accounts for 84% of total U.S. market capitalization, an increase from its historical range of 75% to 80%.

This concentration is further highlighted by the combined market value of Nvidia and Microsoft, the two most valuable U.S. companies, which is roughly equivalent to the approximately 3,000 companies outside the S&P 500 with market capitalizations exceeding $250 million.

Vanguard ETFs: VOO vs. VTI

Vanguard, a prominent investment management firm, offers both the popular Vanguard S&P 500 ETF (VOO) and the Vanguard Total Stock Market ETF (VTI). VTI stands as the world’s largest publicly traded fund, managing over $2 trillion in net assets.

Both VOO and VTI share an expense ratio of 0.03%, equating to $3 for every $10,000 invested, which is among the lowest available for exchange-traded funds. They also both report a 30-day SEC dividend yield of 1.1%.

Diversification Differences

A key differentiator between the two funds lies in their number of holdings and subsequent diversification. VOO tracks the S&P 500 index, comprising 504 holdings, while VTI encompasses a broader range of the U.S. stock market with 3,529 holdings, including mid-cap, small-cap, and micro-cap stocks not present in the S&P 500.

This broader scope means that VTI has slightly lower weightings across all S&P 500 components compared to VOO. For instance, the top 10 holdings in VOO collectively represent 40.2% of the fund, whereas in VTI, these same companies account for 35.29%.

Sector Exposure

The allocation differences also extend to sector exposure. VOO has a higher concentration in technology and communications stocks, with 44.9% of its holdings in these sectors. In contrast, VTI allocates 39.9% to technology and communications.

Furthermore, VTI has less exposure to financials but greater weightings in cyclical sectors such as consumer discretionary and industrials. This varied sector exposure could influence performance during different market conditions, potentially offering VTI a resilience during a market downturn driven by a slowdown in specific sectors.

Strategic Investment Choices

Index-based and total-market funds remain effective tools for investors seeking simple, low-cost, and diversified exposure to the stock market. The choice between the Vanguard S&P 500 ETF and the Total Stock Market ETF often depends on an investor’s existing portfolio composition and long-term investment objectives.

Investors with significant holdings in megacap companies might find VTI’s broader market exposure a better fit for diversification. Conversely, those whose portfolios lack substantial exposure to large-cap stocks may benefit from the more concentrated nature of VOO or other megacap-focused funds.