VOO vs VFIAX: Which Vanguard Fund Is Best?

We Compare VOO vs VFIAX:

Choosing between Vanguard S&P 500 ETF (VOO) and Vanguard’s 500 Index Fund Admiral Shares (VFIAX) can be difficult.

Vanguard S&P 500 ETF, VOO, is one of the most straightforward exchange-traded funds (ETFs).  VOO tracks the S&P 500 and has no minimum to begin.

Vanguard 500 Index Fund Admiral Shares, VFIAX, is a popular Vanguard Admiral Fund that tracks the S&P 500 Index.

This comparison will make it easy to decide which is right for you.

 

VOO vs VFIAX

The main difference between VOO and VFIAX is that VOO is an Exchange-Traded Fund (ETF), and VFIAX is a Mutual Fund.  VOO and VFIAX track the same underlying index, the S&P 500.

VOO is an Exchange Traded Fund

VFIAX is a Mutual Fund

I have another post with a full explanation of the difference between an ETF and a Mutual Fund.

Vanguard S&P 500 ETF (VOO) is the ETF equivalent of the top-rated index fund, VFIAX.

VOO provides investors the same market exposure as its admiral version, VFIAX but at a lower expense ratio of 0.03%.

VOO

• Fund Inception: 2010
• Tracks the S&P 500 Index
• Expense Ratio: 0.03%
• Exchange-Traded Fund (ETF)
• No Minimum Investment
• Number Of Stocks: 508
• Top 10 Holdings: 30%
• Dividend Yield: 1.27%

VFIAX

• Fund Inception: 2000
• Tracks the S&P 500 Index
• Expense Ratio: 0.04%
• Admiral Mutual Fund
• Minimum Investment: $3,000
• Number Of Stocks: 508
• Top 10 Holdings: 30%
• Yield 1.27%

VOO and VFIAX have low expense ratios; however, VOO’s expense ratio is lower than VFIAX’s.

VOO expense ratio is 0.03%

VFIAX expense ratio is 0.04%

Lastly, VOO is an exchange-traded fund (ETF); therefore, it trades intraday, while VFIAX only trades once daily at market close.

 

VOO vs VFIAX Performance

Since VOO and VFIAX seek to track the same index and hold the same amount of stocks, it’s not surprising that their performance is identical.

The total return for VOO over the last 10 years is 15.38% per year.  The total return for VFIAX over the previous 10 years is 15.38%.  No difference!

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

As you can see from the chart, the performance of VOO and VFIAX has overlapped in the previous 10 years.

 

VFIAX vs VOO Expense Ratio

The difference in expense ratio between VFIAX and VOO is only 0.01%.  VFIAX has an expense ratio of 0.04%, while VOO has an expense ratio of 0.03%.

Example:

Assuming you start with an initial investment of $100,000 and contribute $10,000 yearly over 30 years.

You will have $5,000 less in your account because of the extra 0.01% expense ratio.

This difference isn’t much, and it could be considered insignificant for a long-term investor.

Winner: VOO with the lowest expense ratio of 0.03%

 

VFIAX vs VOO Tax Efficiency

VFIAX and VOO provide the same tax efficiency for long-term investors.  Therefore, it doesn’t matter which one you consider, VOO or VFIAX; the tax efficiency is the same.

Important:

Switching from VFIAX to VOO is not a taxable event.

Switching from VOO to VFIAX can be a taxable event.

At Vanguard, they will allow a one-time switch from VFAIX to VOO, but not the other way around.

 

VOO vs VFIAX Dividend

The dividend yield for VOO and VFIAX will always be the same since they track the same index and have the same number of holdings.  Currently, the dividend yield for both VOO and VFIAX is 1.27%.

The dividend yield can change depending on the price of the funds.

Both VOO and VFIAX pay a dividend quarterly at Vanguard, which can be reinvested.

The dividend for VOO and VFIAX is the same.

 

VOO Profile

• Fund Inception: 2010
• Tracks the S&P 500 Index
• Expense Ratio: 0.03%
• Exchange-Traded Fund (ETF)
• No Minimum Investment
• Number Of Stocks: 508
• Top 10 Holdings: 30%
• Dividend Yield: 1.27%

Vanguard’s S&P 500 ETF (VOO) was launched in 2010 and is also a popular Vanguard ETF.  The fund tracks the performance of the popular S&P 500 index, which holds over the 500 largest U.S. stocks, weighted by market capitalization.

The S&P 500 usually serves as a benchmark for measuring the performance and overall health of the U.S. stock market.

Vanguard S&P 500 ETF attempts to duplicate the result of its underlying index, the S&P 500, by investing almost 100% of its assets in the same securities held in the index.

Each stock in the fund holds almost the same proportion of its weighting in the S&P 500 index.

VOO has a heavy large-cap weighting toward both growth and value stocks.

This is another way to say that its holdings are not just focused on the large-cap value category of the U.S. market but also on the large-cap growth sector.

 

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 closely.

VOO (Blue)             S&P 500 (Yellow)

 

VOO Holdings

Here are the top 10 holdings for VOO:

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

 

VFIAX Profile

Vanguard 500 Index Fund Admiral Shares (VFIAX) provides investors 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 is the admiral version of the Vanguard S&P 500 ETF (VOO).

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

Super low expense ratios and strong diversification make Vanguard funds like VFIAX very attractive for long-term investors.

 

VFIAX Performance

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

VFIAX (Blue)             S&P 500 (Yellow)

 

VFIAX Holdings

These are the top 10 holdings for VFIAX:

VFIAX is largely made up of Apple, Microsoft, Alphabet, Amazon, and Tesla and provides exposure to over 500 other stocks.

 

VFIAX Minimum Investment

For a first-time investment in VFIAX, you need to have a minimum of $3,000.  After that, you are at liberty to invest any amount you want.

As a first-time investor in VOO, you only need to have the price of one share as a minimum investment.  So, for example, if VOO’s share price is $50, you can invest in the fund with as little as $50.

So if you are starting small, your best choice might be VOO.

Alternatively, you could invest with no minimum requirement into VOO or many other ETFs through M1 Finance.  (Use this link for a $50 Bonus)

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’s free tools allow you to easily find which of your investments has high fees so that 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)

 

Can You Convert VOO To VFIAX?

Yes, you can convert VOO to VFIAX, but it’s important to note this could be considered a taxable event.  This is because converting VOO to VFIAX involves selling your shares of VOO to buy shares of VFIAX.

At Vanguard, they will allow a one-time switch from VFAIX to VOO, but not the other way around.

 

Is VOO or VFIAX Better?

VOO and VFIAX are suitable investments and will always perform the same.  They are also both low-cost funds.

Whether VOO or VFIAX is better depends on your investing preferences and if you prefer mutual funds or exchange-traded funds.

To make it easier to decide, I’ll lay out the advantages of both of them:

VOO Advantages:

• Lower Expense Ratio
• No Minimum Investment
• All Day Trading

VFIAX Advantages:

• Automatic Investing
• Once Daily Trading
• Can Purchase Fractional Shares

Mutual funds like VFIAX have a few critical benefits, like automatic investing.  However, you must log in and purchase shares regularly on Vanguard’s platform with VOO.

Also, the all-day trading of ETFs can encourage market timing.  With VFIAX, it only trades once a day at market close, so intraday price fluctuations matter less.

Lastly, VFIAX allows purchasing fractional shares, which means you remain fully invested.  With VOO, there will be cash balances between purchases of whole shares.

VOO’s advantages are that you can invest in this ETF either on Vanguard, M1 Finance, or many other investing platforms.

VOO and VFIAX can be great investment options and get you to Financial Independence Retire Early (FIRE).

They both have rock-bottom expense ratios (0.03% vs 0.04%).

After keeping 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!

Related Posts:

• VTSAX vs VFIAX
• VOO vs SPY
• VFIAX vs VFINX
• QQQ vs VOO

 

My Winner: Both

VOO and VFIAX are identical in many ways.  As a result of tracking the same index (S&P 500), they hold the same assets and therefore have identical exposure.

You need $3,000 as a minimum investment to invest in VFIAX; that’s against the price of a share which is the requirement to start investing in VOO.

For beginning investors, this may mean a lot.

If you have trouble meeting the minimum requirement for VFIAX, you can always invest in VOO with Vanguard or the free M1 Finance App.

Ultimately, the decision comes down to your preference for mutual or exchange-traded funds.