VFIAX vs VFINX: Which Is Really Better?

VFIAX vs VFINX: Which Is Really Better?

In this article, we are going to explore the difference between Vanguard 500 Index Fund Admiral Shares (VFIAX) vs Vanguard 500 Index Fund Investor Shares (VFINX).

There are so many factors when it comes to choosing the right index fund.  Choosing between two similar funds can be difficult, but this comparison will make it easy for you to decide between VFIAX vs VFINX.

 

VFIAX vs VFINX

The primary difference between VFIAX and VFINX is the minimum initial investment and the expense ratio.  They also have different classifications by Vanguard.  VFIAX is an admiral share fund, while VFINX is an investor share fund.

VFIAX:

  • Tracks the performance of the S&P 500 Index
  • Has an expense ratio of 0.04%
  • $3,000 minimum initial investment
  • Holds 508 stocks

VFINX:

(Closed To New Investors)

  • Tracks the performance of the S&P 500 Index
  • Has an expense ratio of 0.14%
  • No minimum initial investment
  • Holds 508 stocks

VFIAX vs VFINX Graphic 

Are VFINX and VFIAX the Same?

VFINX and VFIAX are not the same funds.  They technically have a different fund number.  However, they are very similar in their company holdings and Vanguard suggests them as a similar alternative.

Similarities between VFINX and VFIAX:

  • Tracks the performance of the S&P 500 Index
  • Similar Performance
  • Broad Diversification (Over 500 Stock Holdings)
  • Low Expense Ratios

 

Here is how their performance compares over the last 10 years:

VFIAX vs VFINX Performance

VFIAX and VFINX perform nearly identical.

 

VFINX and VFIAX Differences

VFINX vs VFIAX primarily differ in that VFINX is now a closed fund.  This means new investors cannot purchase VFINX anymore. 

Instead, Vanguard is directing new investors to Vanguard S&P 500 ETF (VOO) or Vanguard 500 Index Fund Admiral Shares (VFIAX). 

VFIAX is an admiral share index fund that has a $3,000 minimum initial investment and a lower expense ratio.  VOO also provides a lower expense ratio with no minimum to purchase.

Differences between VFINX and VFIAX:

  • Minimum Initial Investment
  • VFIAX is an Admiral Shares Fund
  • VFINX is an Investor Shares Fund
  • VFINX is Closed to New Investors
  • Different Expense Ratios

 

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VFINX Profile

  • Fund Inception: 1976
  • Expense Ratio: 0.14%
  • Number Of Stocks: 508
  • Top 10 Holdings: 26.50%

 

Vanguard 500 Index Fund Investor Shares (VFINX) is the non-admiral shares version of the very popular index fund, VFIAX.

The fund, as of March 31st, 2020, has $443.6 billion in total net assets.

VFINX Holdings

VFINX is largely made up of Microsoft, Apple, Amazon, Alphabet, and Facebook, but also provides exposure to over 500 stocks.

 

No Minimum Investment

VFINX is an Investor Shares Fund, which means there is NO minimum to invest.  The issue is the fund is now closed to all new investors.  New investors looking for a no-minimum alternative can purchase the Exchange-Traded Fund (ETF) version of VFINX, which is Vanguard S&P 500 ETF (VOO). 

There is NO minimum requirement to purchase VOO and can be bought commission-free with Vanguard.

 

VFINX Historical Returns

Take a look at the historical chart below.  You will see VFINX and the S&P 500 closely overlap:

VFINX vs S&P 500 Performance

VFIAX Profile

  • Fund Inception: 2000
  • Expense Ratio: 0.04%
  • Number Of Stocks: 508
  • Top 10 Holdings: 26.5%

 

Vanguard 500 Index Fund Admiral Shares (VFIAX) provides investors with exposure to 500 of the largest companies in the U.S.  This accounts for about three-quarters of the United States stock market’s value.  

VFIAX was created in 2000 and currently has an expense ratio of only 0.04%.

According to Vanguard: the average expense ratio of similar funds is 0.93%.  That is 23 times cheaper than similar funds in the market!

Super low expense ratios are what makes Vanguard funds like VFIAX very attractive for long term investors.

VFIAX is largely made up of Microsoft, Apple, Amazon, Alphabet, and Facebook but also offers exposure to over 500 stocks.

VFIAX Holdings

Over the last 10 years, VFIAX has returned an average of 10.49% per year as of March 31, 2020.

 VFIAX has become one of the most popular index funds because of it’s strong diversification and ultra-low expense ratio.

  Also Check Out VIGAX vs VFIAX: A Full Comparison With Investing Tips

$3,000 Minimum Investment

VFIAX used to have a minimum initial investment of $10,000, but this changed in 2018 to $3,000.  Once you save up the $3,000 minimum, each dollar invested after that does not have a minimum.

You can avoid this minimum investment threshold through retirement account contributions or by investing in Vanguard S&P 500 ETF (VOO).

 

Investor Shares vs Admiral Shares

Investor shares are usually a more accessible option for newer investors because they do not require a minimum investment.  In comparison, if you can afford to invest in admiral shares, it’s usually the better option. 

Admiral shares always carry a lower expense ratio compared to their alternative investor share funds.  Even small differences in expense ratios can make a big difference in the total long-term returns of a portfolio.

Vanguard recently lowered the admiral share funds minimum investment from $10,000 to $3,000.  As a result, they’ve decided to close investor share funds to new investors.

Since VFIAX is an admiral share fund, I prefer it over VFINX.  For new investors, VFIAX is the only option left out of the two funds.

 

Which is Better VFIAX or VFINX?

VFIAX and VFINX are very similar investments.  Since VFIAX is an admiral share fund, it offers significantly more advantages.

I would choose to transfer my VFINX investments to VFIAX because of the lower expense ratio.  There is also no minimum investment requirement once you surpass an account balance of $3,000.

So with VFIAX, you get all the benefits of VFINX, but at a lower cost.

 

Is VFIAX or VFINX Better for Financial Independence?

Both VFIAX or VFINX can get you to Financial Independence Retire Early (FIRE).  Since they track the same index, they both have a similar return on investment.  However, even small differences in expense ratios can make a big difference over the long term.

So I would choose Vanguard 500 Index Fund Admiral Shares (VFIAX) for the super low expense ratio.

If you already have investments in VFINX, I would consider switching it to VFIAX or VOO.  As long as it doesn’t create a taxable event.

By switching, you get the same portfolio performance for a lower expense ratio.  That’s a no brainer!

After keeping investing fees to a minimum, you can work on increasing your savings rate and Prioritizing Your Investments

Then, you will be well on your way to Financial Independence and Early Retirement!

 

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