Vanguard's S&P 500 and Total Stock Market ETFs Offer Nearly Identical Risk Profiles

A $1,000 investment in the S&P 500 ETF ten years ago would be worth approximately $3,800 today, compared to just under $3,700 for the Total Stock Market ETF. These returns are driven by a slightly heavier tech focus in the S&P 500 ETF, which allocates 33% of its portfolio to the technology sector versus 31% for the Total Stock Market ETF. The Vanguard S&P 500 ETF (VOO) holds approximately 500 large-cap stocks, while the Vanguard Total Stock Market ETF (VTI) holds over 3,500 stocks across the small- to large-cap spectrum. Because the S&P 500 ETF excludes small- and mid-cap stocks, it avoids the volatility associated with smaller companies during economic instability. However, its higher tech concentration makes it more susceptible to drawdowns if the technology industry is hit hard. The Total Stock Market ETF's broader diversification across 3,500 stocks reduces the risk that a single stock or industry will significantly affect performance, but it includes smaller companies that are more vulnerable to volatility. Despite these structural differences, historical data shows nearly identical risk profiles. In the 2022 bear market, the S&P 500 ETF dipped by approximately 18% and the Total Stock Market ETF fell by roughly 19%. Between late 2007 and 2009, the Total Stock Market ETF experienced a drawdown almost identical to that of the S&P 500. A $1,000 investment in the Total Stock Market ETF ten years ago would be around $3,700 today.