NEW YORK, July 20, 2026, 11:08 EDT — The Vanguard Total Stock Market ETF (VTI) offers exposure to a far broader universe of stocks than its large-cap counterpart, the Vanguard S&P 500 ETF (VOO). However, recent analysis reveals that this additional diversification has not provided a shield during periods of market stress.
VTI includes 3,531 holdings, compared to VOO's 506, an excess of 3,025 stocks. Yet, over three significant selloffs — the fourth quarter of 2018, the early months of 2020, and all of 2022 — VOO proved more resilient. VTI underperformed VOO by 0.73 percentage points in Q4 2018, by 1.26 points in Q1 2020, and by 1.35 points in 2022.
The data underscores a key nuance: broader diversification does not always equate to better downside protection. VTI's top ten holdings still account for 33.4% of assets, and the fund has an 87% overlap by weight with VOO, according to ETF Research Center. This limits the practical impact of its extra holdings.
On Monday morning, VOO traded at $684.22, up $1.05, while VTI was at $367.43, up $0.42. Both funds carry a 0.03% expense ratio. VTI's three-year volatility stands at 13.45%, slightly above VOO's 13.06%. Vanguard notes that mid- and small-cap ETFs, which VTI includes, tend to experience greater price fluctuations.
The earnings yield for VTI, based on a simple inverse price-to-earnings calculation, is 3.70%, versus VOO's 3.64% — a gap of about seven basis points. The 10-year Treasury yield was approximately 4.58% on Monday, meaning both funds' earnings yields trail that benchmark by roughly 0.9 percentage points.
Concentration risk remains a concern. The PHLX Semiconductor Index entered bear market territory on Monday, and Barclays analysts, led by Ajay Rajadhyaksha, highlighted renewed worries about AI investment spending. "The biggest sentiment driver by far seems to be renewed concerns about the AI capex trade," they noted.
Despite its historical underperformance during downturns, VTI has outperformed VOO in 2026. Through June, VTI posted a net asset value return of 11.07%, compared to VOO's 10.19%. Over longer periods, VOO regained its edge, outperforming by 1.12 percentage points annually over five years and by 0.43 points over ten years.
Investors should weigh these trade-offs. VTI offers broader market exposure and may benefit if the market broadens further or if megacap stocks decline sharply. However, past selloffs do not guarantee future performance, and VTI's track record suggests it is not a reliable hedge against downturns.
