Vanguard Total Stock Market ETF Underperforms S&P 500 Fund

The Vanguard Group is facing scrutiny over the performance of its Total Stock Market ETF (VTI) relative to its S&P 500 ETF (VOO). Despite both funds charging an identical expense ratio of 0.03%, VTI has provided lower historical returns. Over a ten-year period, VTI returned 239.31%, while VOO returned 316.76%.

Although VTI markets itself as a diversified vehicle containing between 3,468 and 3,600 U.S. stocks, its market-cap weighting means performance is heavily driven by the same five technology giants that anchor the S&P 500: NVIDIA, Apple, Microsoft, Amazon, and Alphabet.

Analysts argue that the diversification offered by total-market funds like VTI, SCHB, and ITOT is largely illusory because they remain concentrated in mega-cap tech. To achieve genuine diversification, experts suggest investors look toward small-cap value funds, international ETFs, or equal-weight S&P 500 funds.