VOO Vs VOOG: What’s a Better Pick for My Retirement Portfolio?

Retirees are often advised to limit risk in their portfolios. And there’s a good reason for that.

It’s one thing to be invested heavily in riskier assets when you’re in the process of building wealth for retirement. In your 30s and 40s, for example, you have plenty of time to ride out stock market downturns and come out ahead.

You even have some leeway to take on a fair amount of portfolio risk in your 50s, assuming you’re retiring at a traditional age (somewhere in your 60s). But once you’re actually retired, it’s important to manage risk carefully.

At that stage of life, you may be actively taking withdrawals from your portfolio to cover expenses. So it’s important to be comfortable with the way your portfolio is invested.

You may be interested in the Vanguard S&P 500 ETF (VOO) and the Vanguard S&P 500 Growth ETF (VOOG) for your retirement portfolio. Which is better? Let’s dive in.

The Vanguard S&P 500 ETF (VOO)

The Vanguard S&P 500 ETF (VOO) aims to match the performance of the S&P 500 index itself. And that index consists of the 500 largest publicly traded U.S. stocks.

VOO has a low expense ratio and offers the benefit of broad diversification. After all, you’re effectively investing your money in 500 different companies.

The Vanguard S&P 500 Growth ETF (VOOG)

The Vanguard S&P 500 Growth ETF (VOOG) tracks the S&P 500 Growth Index, which encompasses some of the fastest-growing companies on the market. Like VOO, VOOG has a pretty low expense ratio. It also offers a nice amount of diversification, though not to the same extent as VOO, since it doesn’t cover all 500 stocks in the S&P 500.

Which is a better choice for your retirement portfolio?

If you’re not sure whether to invest in VOO versus VOOG, there are three questions to ask yourself:

• How much growth am I looking for?
• How much risk am I willing to take on?
• Which trumps which — growth or risk?

VOOG is a riskier investment than VOO because it consists of fewer stocks, and the companies it invests in are targeting rapid growth, making them inherently more volatile. With VOO, you might enjoy less volatility in retirement.

However, if you’re investing a relatively small portion of your retirement portfolio in stocks and are keeping the bulk of your assets in bonds and cash, VOOG may be a more optimal choice for boosting gains. And remember, you need those gains to outpace inflation during retirement the same way you need your investments to beat inflation while you’re saving for your senior years.

That said, neither is a poor choice for a retirement portfolio, and neither has to be your only choice. Holding both of these ETFs could give you the best of all worlds — the relative stability of VOO (with the understanding that the broad stock market is, of course, subject to wild swings), and the growth potential of VOOG.

The bottom line

VOO is a great catch-all for retirees who want to stay invested in the stock market without taking on undue risk or having to do too much thinking. VOOG is more risky, but it also doesn’t necessarily require a lot of research — that’s the beauty of ETFs.

Decide what your investing goals are, and weigh them against your income needs. And also, consult with a financial advisor if you’re not sure which assets to put your money into. They can help you understand the pros and cons of various choices and help you put together a portfolio of assets that complement one another nicely.

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