VOOG vs VOOV - Which S&P 500 ETF Is Best? (S&P 500 ETFs Key Differences Explained!). In this comparison video I will talk about VOOG vs VOOV.
So, the main difference between them is the indices tracked.
VOOG tracks the S&P 500 Growth index. This index identifies growth stocks by analyzing the ratio of earnings change to price, sales growth, and momentum. It represents the fastest-growing companies in the S&P 500 and is currently weighted towards the tech industry.
Conversely, VOOV tracks the S&P 500 Value Index. This index comprises the strongest S&P 500 value stocks. The S&P 500 value index tracks these stocks using a style-attractiveness weighting scheme, resulting in a narrower focus than the growth index.
Therefore, VOOG tracks growth stocks in the S&P 500, while VOOV tracks value stocks.
Dividend yield
VOOV has higher dividend yields compared to VOOG. This difference is attributed to VOOV's focus on value stocks. Most investors ignore value stocks, which typically are underpriced due to negative perceptions or poor earning reports. Interestingly, companies trading in value stocks have a history of paying dividends.
In contrast, growth stocks rarely pay dividends. Companies issuing growth stocks are some of the fastest-growing in the market. They reinvest their earnings into their growth, resulting in higher earnings but lower dividends. Investors make money through capital gains made after selling their shares.
Therefore, VOOV pays higher dividends, making it ideal for investors wanting a stable income source.
Volatility
VOOG currently has a higher volatility of 5.73% compared to VOOV's 3.06%. This difference indicates that VOOG's prices fluctuate more frequently and with higher margins than VOOV's, which makes VOOG riskier.
Therefore, VOOV’s prices are less volatile, making it ideal for risk-averse investors and beginners.
But do they have any similarities?
Yes. Both ETFs track the S&P 500. They have similar expense ratios and are housed within the Vanguard S&P 500 ETF (VOO). Additionally, they're both passively managed; thus, they aim to replicate the underlying index's performance.
To sum up, which is better- VOOG or VOOV?
I'm always on the lookout for secondary income sources. Therefore, VOOV's dividend payout, lower fees, and higher stability made this fund a no-brainer. However, I also like switching things up, and VOOG helps me do that. Its focus on growth stocks allows me to diversify my portfolio and promises higher capital gains. With that said, I pick VOOV as today's winner.
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