VIG vs. VOO & VTI - Dividend Growth ETF vs. S&P 500 & Total Stock Market

Summary

This video compares three Vanguard ETFs: VIG, VOO, and VTI. VIG focuses on dividend growth stocks and tracks the S&P U.S. Dividend Growers Index, but it has underperformed VOO and VTI since its inception. VOO tracks the S&P 500, while VTI provides broader exposure to the entire U.S. stock market, including small- and mid-cap stocks. Both VOO and VTI have lower expense ratios and greater popularity compared to VIG. For investors seeking diversified exposure, VOO or VTI are recommended as core holdings, while VIG is best for those specifically interested in dividend growth.

Takeaways

• 📈 VIG is Vanguard’s Dividend Growth ETF, focusing on companies with a history of increasing dividends.
• 📊 VOO tracks the S&P 500 Index, representing large-cap U.S. stocks, while VTI covers the entire U.S. stock market.
• 🔍 VIG excludes the top 25% highest-yielding stocks to mitigate the risks of unstable companies.
• 📉 VIG has a small negative exposure to Size and Value factors, but offers good exposure to Profitability and Investment factors.
• 💼 VOO and VTI are more popular and larger in assets, with VOO at over $550 billion and VTI at $900 billion, compared to VIG's $60 billion.
• 🧩 VTI includes small- and mid-cap stocks, offering broader diversification than VOO, which focuses only on large caps.
• 🔌 Sector weightings for VIG are significantly different from VOO and VTI, particularly underweighting Telecom, Energy, and Real Estate.
• 💡 VIG is better used as a complement to a diversified portfolio rather than a core holding.
• 🏆 Since VIG's inception in 2006, both VOO and VTI have outperformed it in terms of total and risk-adjusted returns.
• 💰 VIG has a higher expense ratio (0.06%) compared to VOO and VTI (0.03%), making them more cost-effective options for investors.

Q & A

What is VIG and what does it focus on?

VIG is Vanguard's Dividend Appreciation ETF, which focuses on dividend growth stocks—companies that have historically increased their dividends over at least the past 10 years.

How does VIG compare to VOO and VTI?

VIG is compared to VOO and VTI as VOO tracks the S&P 500 Index and VTI tracks the total U.S. stock market. VOO and VTI perform nearly identically as broad market funds, while VIG specifically targets dividend growth.

What is the expense ratio for VIG compared to VOO and VTI?

VIG has an expense ratio of 0.06%, while VOO and VTI have lower expense ratios of 0.03%.

What types of stocks does VIG exclude?

VIG excludes the top 25% highest yielding stocks because high yields can indicate potential instability in a company.

What is the main index that VIG seeks to track?

VIG seeks to track the S&P U.S. Dividend Growers Index.

How does the market cap weighting work in VIG?

Holdings in VIG are market cap weighted and are capped at 4% for any single stock.

What percentage of holdings in VTI are large-cap stocks?

VTI comprises approximately 82% large-cap stocks.

Which sectors are underweighted in VIG compared to VOO and VTI?

VIG drastically underweights Telecom, Energy, and Real Estate sectors relative to the market.

What has been the performance comparison between VIG, VOO, and VTI since VIG's inception?

Since VIG's inception in 2006, both VOO and VTI have outperformed VIG in terms of general and risk-adjusted returns.

What role does VIG play in a diversified investment portfolio?

VIG may not be sufficient as a core holding but can be used to tilt or overweight dividend growth stocks within a diversified portfolio.