VOO vs. VTI: Which US stock market ETF could benefit more from rate cuts? – Vanguard S&P 500 ETF (ARCA:VOO), SPDR S&P 500 (ARCA:SPY)

When it comes to two of the largest US stock market funds, one might now notice that the Federal Reserve has decided to cut interest rates

Here is a look at the key differences between the Vanguard S&P 500 ETF VOO and the Vanguard Total Stock Market ETF VTI.

VOO ETF vs. VTI ETF: The Vanguard S&P 500 ETF tracks the S&P 500 index and holds around 500 stocks. The ETF is heavily weighted towards the stocks of the Magnificent Seven and large-cap companies.

The Vanguard Total Stock Market ETF tracks the CRSP US Total Market Index and holds 3,656 stocks at the time of writing.

The key difference is that only the VTI holds stocks outside the S&P 500 index, giving the ETF a higher weighting of small-cap and mid-cap stocks.

Interest rate cuts have historically had a positive impact on small-cap stocks by making financing more affordable for companies.

Here are the top 10 holdings of the two ETFs as of August 31:

As investors can see, the top 10 holdings are the same in both funds. The difference is in the weightings, with VOO being more focused on its top 10 holdings and VTI having smaller weightings due to the larger overall holdings in the fund.

Each of the two Vanguard ETFs has an expense ratio of 0.03%, which is rather low for ETFs and cheaper than the expense ratio of 0.09% for the SPDR S&P 500 ETF Trust SPYwhich also tracks the S&P 500 ETF Trust and trades similarly to VOO.

ETF Performance: Due to different holdings and tracking methods, ETFs have had different performances over the years.

Also read: VOO vs. VTI: These are the key differences between the Vanguard US Stock Market ETFs that investors should know

ETF performance: Because the ETFs tracked different indices and holdings, they showed different performance over the years.

Here's a look at VOO's recent performance versus VTI and how the two ETFs compare to SPY, the first U.S. ETF launched in 1993.

The Vanguard S&P 500 ETF has slightly outperformed the SPDR S&P 500 ETF Trust, likely due to timing and asset weight rebalancing. The ETF has also outperformed the Vanguard Total Stock Market ETF, with large-cap stocks outperforming the overall market index during the aforementioned periods.

With interest rate cuts currently a major consideration for investors, the Vanguard Total Stock Market ETF could attract inflows as it captures a larger share of small-cap stocks that are poised for a new uptrend.

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