You are currently viewing VFINX vs VOO: Which Vanguard Fund Is Better?

VFINX vs VOO: Which Vanguard Fund Is Better?

  • Reading time:15 mins read

We are going to explore the difference between VFINX vs VOO:

Vanguard 500 Index Fund Investor Shares (VFINX) vs Vanguard S&P 500 ETF (VOO)

When it comes to investing, there is no shortage of fund options.

Choosing between two funds can be difficult, but I will make it easy to decide between VFINX vs VOO.

Vanguard S&P 500 funds have been around for a while and have shown outstanding performance. The funds are well-diversified large-cap and the best fit for the long-term investor. They trace the performance of the S&P large-cap U.S. stock market.

Although VFINX has been in the market longer than VOO, the two funds have the same investment holdings and are exposed to the same industry and security.

Despite the similarity between the two funds, it’s wise to take an in-depth look at the differences that can influence the investors’ sentiment.

This article gives an overview of VFINX vs VOO and a general opinion on which fund is better.

VFINX vs VOO Graphic Comparison

 

VFINX vs VOO

The primary difference between VFINX and VOO is that VOO is an Exchange Traded Fund (ETF), while VFINX is an index fund.

Another significant difference is the expense ratio for each fund. For example, VOO has an expense ratio of 0.03% compared to 0.14% with VFINX.

VFINX and VOO have different expense ratios.

VFINX has an expense ratio of 0.14%

VOO has an expense ratio of 0.03%

This expense ratio difference means VFINX is more expensive than VOO. The difference can be considered significant for most investors.

Vanguard offers an “Admiral” fund called VFIAX that is the same as VFINX except that the expense ratio is much lower at 0.04%, with a minimum investment threshold of $3,000.

See my comparison of VOO vs VFIAX.

The Vanguard 500 Index Fund (VFINX) tracks the S&P 500 index. The index covers almost 80% of the investable market cap of the U.S. stock market.

The fund tries to replicate the performance of the S&P 500 and measure the return on investment. VFINX, as an investor share, offers an expense ratio of 0.14%.

VFINX falls under Vanguard’s investor share class, designed particularly for individual or retail investors. The minimum initial investment for this class is usually $0 – $100.

The fund is passively managed, meaning stocks are not actively traded but selected according to specific index rules.

In November 2018, Vanguard decided to restructure its investment product. As a result, VFINX is now closed to new investors.

VFINX

  • Tracks the S&P 500 Index
  • Expense Ratio 0.14%
  • Holds 513 Stocks
  • Closed To New Investors
  • Equivalent Admiral Fund (VFIAX)

VOO

  • Tracks the S&P 500 Index
  • Expense Ratio 0.03%
  • Holds 513 Stocks
  • Equivalent Admiral Fund (VFIAX)
  • Dividend Yield 1.35%

Vanguard S&P 500 ETF (VOO) seeks to track the performance of the S&P 500 index that measures the investment return of large-capitalization stocks.

The fund uses an indexing investment approach designed to track the performance of the S&P 500 index. This means that investors cannot invest in the index, but they can mirror the index by investing in the assets of the S&P 500 stock.

VOO as an ETF is also available as an admiral share class that combines low expense ratios with low investment minimums, making investing affordable.

The class’s low expense ratio is approximately 41% lower than the standard investor share class. The fund operates at an expense ratio of 0.03%.

VOO offers a no minimum initial investment and is the best fit for new and retail traders.

The fund is a diversified portfolio and helps reduce the risk of loss, and comprises large U.S equities.

VFINX and VOO’s key characteristics are the index investing that tracks the investment returns of the S&P 500 index.

VFINX and VOO’s risk level is moderate to aggressive (Level 4).

This means that the fund is subject to wide fluctuations in share prices because it holds all of its assets in common stocks. As a result, these funds may be appropriate for investors with a long-term investment plan of 10 years or more.

 

VFINX vs VOO Performance

VFINX and VOO track the S&P 500 index. However, over the past decade, VOO has outperformed VFINX by 0.04%.

VFINX’s lower performance is because the fund charges 5 times more than VOO’s annual fees.

VFINX has given a return of 11784.38% since its inception in 1986, with 10.29% over the past year, 10.22% over the past 3 years, 11.85% over the past 5 years, and 12.84% over the past decade.

As of today, VFINX is closed to new investors, and Vanguard is directing new investors to VFIAX and VOO.

 

VFINX vs VOO Holdings

VFINX and VOO have the same holdings. 87.8% of the fund’s holdings are large-cap companies, and the remaining 12% are mid-cap.

Both funds are exposed to the same industry and hold the same security with 28.8% in technology.

Here are the top 10 holdings for VFINX and VOO:

VFINX vs VOO Holdings

These holdings make up 27% of total assets diversified across different market sectors.

Here are the market sectors:

VFINX vs VOO Holdings Sectors

 

VFINX vs VOO Overlap

VOO overlaps VFINX completely with the S&P 500 index with nearly identical performance over time.

VFINX vs VOO Overlap

The last 1, 3, and 10-year returns show VOO’s performance over VFINX. The performance of VOO can influence investors’ sentiment on which fund to purchase.

 

VFINX vs VOO Differences

The main difference between VFINX and VOO is how they are traded on the stock market. VFINX as an index fund is executed at the end of the day, and VOO as an ETF is traded throughout the day.

Other factors that differentiate the funds are:

 

Expense Ratios

This is the cost in percentage used to cover the fund’s expenses.

VFINX has an expense ratio of 0.14%, while VOO’s expense ratio is 0.03%.

The percentage is on every $10,000 fund balance. The annual account service fee is deducted for the fund balance below the amount.

VOO’s expense ratio is low compared to VFINX. The 0.011 difference can be a big difference for investors.

 

Minimum Investment

Both funds have no minimum investment; however, VFINX is no longer available for new investors, but existing investors still enjoy the benefit of the fund.

VOO is also available as an admiral share.

 

Real-Time Pricing

VFINX share prices are determined by the net asset value of all the holdings in the fund.

VOO is determined by the actual trading volume and not the value of holdings in the fund. This, however, might also be influenced by the net value of assets of the holding.

 

VFINX Profile

Vanguard 500 Index Fund Shares (VFINX) tracks the performance of the fund’s index and measures the investment return of large-capitalization stocks.

Fund Management: Index Mutual Fund
Asset Class: Domestic Stock – General
Category: Large Blend
Risk/reward scale: Level 4- Moderate to Aggressive
Expense Ratio: 0.14%
Minimum Investment: $0 but closed to new investors

 

VFINX Performance

Vanguard’s VFINX has a Year to Date (YTD) return of -20.02% and has made up to 12.80% return on investment over the years.

VFINX Performance

 

VFINX Holdings

VFINX Holdings

Vanguard’s VFINX is primarily made up of Apple, Microsoft, Amazon, Tesla, and Alphabet and provides exposure to over 500 other stocks.

 

No Minimum Investment

VOO is an exchange-traded fund (ETF), so there is no minimum investment. Investors looking to buy fractional shares can use platforms like M1 Finance.

Usually, fractional shares are not available for ETFs, but with M1 Finance, you can purchase fractional shares with no commission.

Buying fractional shares allows you to maximize your investment. This is great for shares of VOO due to its high price per share.

There are two easy ways to invest in VOO commission-free.

  1. Vanguard
  2. M1 Finance (Use this link for $50 when you open a new account)

Both of these options are free. This is important because fees can lower our returns.

I like M1 Finance as the best option because it gives you the flexibility to purchase VOO and thousands of other stocks.

I also use Personal Capital to track my investment fees. They have a free Retirement Fee Analyzer that tells you the future impact of fees on your portfolio.

Personal Capital Retirement Fee Analyzer

Personal Capital’s free tools allow you to quickly find which of your investments has high fees so you can switch them to low-cost options. (Get a $20 Amazon Gift Card with this link when you add at least one investment account containing a balance of more than $1,000 within 30 days)

 

VOO Profile

  • Fund Inception: 2010
  • Expense Ratio: 0.03%
  • Number Of Stocks: 508
  • Top 10 Holdings: 30%
  • Dividend Yield: 1.35%
  • Equivalent Admiral Fund (VFIAX)

Vanguard S&P 500 ETF (VOO) is a very popular ETF that tracks the S&P 500 index. VOO has over $816 billion in fund total net assets.

The fund invests in technology, healthcare, financials, industrials, and other industries and has a low expense ratio.

Vanguard’s VOO ETF has been labeled one of the best investments for beginners because of its low cost, built-in diversification, and excellent performance.

 

VOO Performance

Vanguard’s VOO aims to have the same performance returns as the S&P 500 index. Therefore, VOO and the S&P 500 should always overlap.

Here is VOO and the S&P 500 Index performance chart:

VOO vs S&P500 Performance Graph

VOO (Blue)                S&P 500 (Yellow)

As you can see, VOO and the S&P 500 overlap in performance.

This should be an expectation in the future.

 

VOO Holdings

VOO Top Holdings

Vanguard’s VOO is primarily made up of Apple, Microsoft, Alphabet, Amazon, and Tesla and provides exposure to over 500 other stocks.

 

Which Is Better: VFINX or VOO?

VFINX and VOO track the investment returns of the S&P 500 index. This diversified index keeps risk and volatility low and operates at a low expense ratio.

VOO as an ETF displays the characteristics of conventional trading, while VFINX’s value is calculated based on its net asset value.

Which fund is better depends on your preference of expense ratio, performance, and fund accessibility.

You will also prefer VOO if you want to get the lowest cost fund and for potential investors that might not have the minimum requirement for VFINX counterpart VFIAX.

The easy access to funds has given VOO an edge over VFINX.

The expense ratio can increase your returns on investment. For example, the expense ratio for VOO is 0.03% and 0.14% for VFINX.

This means fund expenses for each $10,000 investment for VOO is just $3, and that of VFINX is $14.

For investors, 0.11% is an excellent way to save costs and increase returns.

Related Posts:

 

Is VFINX or VOO Better for Financial Independence?

The expense ratio differences between VFINX and VOO cannot be overlooked as they affect the fund’s return on investment.

For new investors, you could opt for VOO and grow the funds to the minimum amount before changing to VFIAX.

Vanguard’s restriction on VFINX for new investors with the admiral share benefit of VOO can put an edge over your return on investment, making VOO the most preferred fund.

The critical point between these funds is the structural differences; VFINX is a mutual fund while VOO is an Exchange Traded Fund (ETF).

This also determines the difference in expense ratios.

With this in place, VFINX and VOO are almost identical in performance and portfolio.

JL Collins FIRE Calculator

Calculate Your FI Number With My Free FIRE Calculator

Both VFINX and VOO can get you to financial independence, both funds’ returns on investment are impressive, and they have the same minimum investment.

However, in the long run, fund fees can decrease returns. Therefore, if you already have investments in VFINX, I would consider switching to VOO.

By switching from VFINX, you get a lower fund expense ratio with the same portfolio performance.

 

My Winner: VOO

VOO as an ETF has no minimum investment amount, and the expense ratio is relatively low compared to VFINX.

 


Disclaimer
This post may have affiliate links, which means I may receive commissions if you choose to purchase through links I provide (at no extra cost to you). Thank you for supporting the work I put into this site!

This information is my opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
Fat FIRE: Early Retirement In Style!