VTSAX vs VFIAX: Side By Side Comparison With Investing Tips

VTSAX vs VFIAX: Side By Side Comparison With Investing Tips

One of the most common questions I get is about which Vanguard Admiral Fund is the best investment.  I’ve compared many of the Vanguard’s most popular funds.  Today we will compare VTSAX vs VFIAX and I will help you determine which one is best for you.

I also share how you can start taking advantage of these two funds right away by investing in the equivalent exchange-traded funds (ETFs), buying fractional shares, or getting started with investor shares.  

 

VTSAX vs VFIAX

The primary difference between Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) and Vanguard 500 Index Fund Admiral Shares (VFIAX) is the target index fund they desire to track.  VTSAX tracks the CRSP US Total Market Index which provides investors with exposure to the entire United States equity market.  The U.S equity market includes small, mid, and large-cap growth and value stocks.

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

VTSAX vs VFIAX Graphic

 

VTSAX Overview

  • Fund Inception: 2000
  • 10-Year Performance 12.87%
  • Aims For Total Market Exposure
  • Expense Ratio: 0.04%
  • Number Of Stocks: 3535
  • Top 10 Holdings: 22.40%
  • Yield 1.88%

Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) is the admiral version of the Vanguard Total Stock Market ETF (VTI).

VTSAX was created in 2000 and currently has a rock bottom expense ratio of only 0.04%.

These are the top 10 holdings for VTSAX:

VTSAX Holdings NEW

As you can see VTSAX is largely made up of Microsoft, Apple, Amazon, and Google but also provides exposure to over 3500 stocks.

 

VFIAX Overview

  • Fund Inception: 2000
  • 10-Year Performance 13.12%
  • Aims To Track The S&P 500
  • Expense Ratio: 0.04%
  • Number Of Stocks: 508
  • Top 10 Holdings: 27.00%
  • Yield 1.84%

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

These are the top 10 holdings for VFIAX:

VFIAX Holdings

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

The top 10 holdings for VTSAX vs VFIAX are the same stocks but in different percentages.  These 10 stocks make up more of VFIAX at 27% compared to VTSAX at 22.40%.  This means changes in these 10 stocks will affect VFIAX more than VTSAX.

 

Admiral Funds Have A Minimum Investment

Both VTSAX and VFIAX are characterized by Vanguard as admiral funds.  One of the benefits of admiral funds is their lower management fee (expense ratio).

The downside is Vanguard admiral funds have a minimum investment threshold.  This minimum used to be $10,000 but recently Vanguard reduced it to $3,000.  Once the $3,000 minimum threshold is met, there is no minimum investment thereafter.

 

Investing Tips

Now that we have seen the differences and similarities, we can go into how to use this information to our advantage.  We will do this by taking advantage of these two funds right away.

We can do this by:

  1. Investing In Equivalent Exchange-Traded Funds (ETFs)
  2. Buying Fractional Shares
  3. Starting With Investor Shares

 

Equivalent Exchange-Traded Funds

As mentioned, both VTSAX and VFIAX have equivalent ETFs and they both do not have a minimum investment.  The equivalent ETFs are the same in performance but they can differ slightly in expense ratio.

Here Are Their Equivalent ETFs:

VTSAX = VTI

VFIAX = VOO

If the minimum investment of $3000 is an obstacle for you, one option is to invest in either Vanguard Total Stock Market ETF (VTI) or Vanguard S&P 500 ETF (VOO).

 

Buying Fractional Shares

Another way to take full advantage of your investment money is to invest every single dollar by purchasing fractional shares of these Exchange-Traded Funds (ETFs).  Normally, if you have $100 to invest and an ETF like VTI costs $150, you would have to wait until you save another $50 to then purchase one full share.

However, recently I’ve discovered you can purchase fractional shares of ETFs with no commissions using a platform called M1 Finance.

So now you don’t have to leave your money sitting in your account earning nothing until you can purchase a full share.  You can invest the money you want to invest right away and take advantage of any market gains.

This is especially important because missing out on only a few days of market gains can have devastating effects on your portfolio’s performance.

Here is what Fidelity found would happen to your portfolio by not being invested in the market on it’s best days:

Missing Out On Market Gains

If you were incredibly unlucky and missed the best 5 days in 38 years, it would result in a decline of 35% in your portfolio balance!  Since we have no idea when those best days will occur it’s best to always stay invested.

 

Time In The Market Beats Timing The Market!

– Ken Fisher

 

Buying fractional shares allows you to maximize your investment.  This is especially beneficial if you’re interested in investing in higher-priced funds like VOO (current price as of June 2020 = $277).

Try M1 Finance For Free

 

Starting With Investor Shares

There is yet one other option to start investing as soon as possible into VTSAX or VFIAX and that is starting with their investor share funds.  Investor share funds have no minimum investment threshold so it allows you to start investing right away.

Equivalent Investor Share Funds

VTSAX = VTSMX

VFIAX = VFINX

These investor share funds have the same performance because they hold the same stocks.  The downside is their management fee is higher so it’s best to convert to an admiral fund once you pass the $3000 minimum.

 

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Which is Better VTSAX vs VFIAX?

VTSAX and VFIAX are both very good investments depending on your investment goals.  They are also both Admiral Shares Funds with super-low expense ratios.

However, I would give a slight upper hand to VTSAX.

VTSAX has about 7 times more stocks and they are spread out more evenly.  This means VTSAX has more diversification compared to VFIAX.

Having said that, I believe both VTSAX and VFIAX can get you to Financial Independence Retire Early (FIRE).  They both have rock bottom expense ratios (0.04%).  So, either option is a great investment for financial independence.

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!

 

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