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Should you invest your money in VTI vs. VOO? In this video we are talking Vanguard Index Funds for Beginners in 2020 and where you should put your money in 2020.

WHAT IS THE DIFFERENCE BETWEEN ETF'S AND MUTUAL FUNDS?

Both ETF' and Index Funds are considered baskets that contain many different investments, but they are not set up the same. An ETF is very similar to a stock in that it has a ticker symbol and trades just like a stock. You can purchase the ETF throughout the trading day and whatever price you choose to buy it at that i what you get. The price for an ETF is determined by the market as well as the underlying assets in the ETF. If somebody is not willing to pay $85 for the ETF then it won't be sold for that amount. This is different than a mutual fund. A mutual fund is pooled money between many investors. The price of a mutual fund s determined by the value in the underlying investments which is known as the Net Asset Value or NAV. The NAV is determined at the end of the trading day each day which means that if you buy shares of a mutual fund at any point in the day, you will end up paying the price per share determined by the value of the NAV at the END OF THE BUSINESS DAY.

WHAT IS VOO vs. VTI

VOO is an ETF that invests in and tracks the S&P 500 Index. Invests in stocks in the S&P 500 Index, representing 500 of the largest U.S. companies. Goal is to closely track the index’s return, which is considered a gauge of overall U.S. stock returns. The VOO ETF has approx. 512 holdings as of this video and this # fluctuates based on changes in the S&P 500 index of companies.

VTI is an ETF that seeks to track the performance of the CRSP US Total Market Index. The ETF invests in large-Cap, mid-cap, and small-cap equity diversified across growth and value styles. The VTI ETF has approx. 3,592 holdings as of this video which is representative of the entire U.S. Equity market that can be invested in.

Both of these ETF's have an expense ratio of .03% which equates to approx. $0.30 in fees for every $1,000.00 invested in the ETF which is pretty amazing!

MARKET RETURNS AND SHARE PRICE FOR VOO AND VTI

The VOO ETF has the following historical returns:
YTD 29.84%
1 Yr 16.28%
5 Yr 10.96%
Since Inception (2010) 14.47%
Share Price $126.51 (12.16.2019)
Dividend Yield 1.85%

The VTI ETF has the following historical returns:
YTD 29.23%
1 Yr 15.49%
5 Yr 10.59%
10 yr 13.43%
Since Inception (2001) 7.48%
Share Price $273.50 (12.16.2019)
Dividend Yield 1.69%

Both of these ETF returns are so similar because they are both cap-weighted funds, or capitalization-weighted funds. This means that the weightings of the companies in the funds are based on how big the companies are with large companies like Microsoft and Apple taking up a significant portion of the holdings.

Based on all of this evidence, given the similarity in the returns and the extra diversification you get with VTI, you have to go with VTI if you are choosing just one ETF but you should know that BOTH of these ETF's are GREAT options to fund your retirement in the future!