VTSAX vs VOO: Which Is Best?

VTSAX vs VOO: Which Is Best?

We are going to explore the difference between Vanguard Total Stock Market Index Fund (VTSAX) 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 be making it easy for you to decide between VTSAX vs VOO.

 

VTSAX vs VOO

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

VTSAX:

  • Tracks the performance of the CRSP US Total Market Index
  • Has an expense ratio of 0.04%
  • $3,000 minimum initial investment
  • Holds 3535 stocks

VOO:

  • Tracks the performance of the S&P 500 Index
  • Has an expense ratio of 0.03%
  • No Fractional Shares
  • Holds 508 stocks

 

VTSAX vs VOO Performance

VOO and VTSAX are not the same funds.  They have different fund numbers and track a different index.  However, they are very similar in their performance returns over 10 years.

Similarities between VOO and VTSAX:

  • Vanguard Funds
  • Similar Performance
  • Broad Diversification
  • Low Expense Ratios

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

VTSAX vs VOO Performance

As you can see from the chart, they perform almost identically, with VOO outperforming slightly.

 

VOO and VTSAX Differences

VOO vs VTSAX primarily differ in that VOO is an exchange-traded fund tracking only the S&P 500.  VTSAX has a more total world diversification.  Vanguard has an ETF version of VTSAX with is the Vanguard Total Stock Market ETF (VTI).  VTSAX is an admiral index fund that has a $3,000 minimum initial investment and a lower expense ratio compared to non-admiral funds.

Differences between VOO and VTSAX:

  • Minimum Initial Investment
  • Classified as an Admiral fund (VTSAX)
  • Exchange-Traded Fund (VOO)
  • Different Number Of Holdings

 

VOO Profile

  • Fund Inception: 2010
  • Expense Ratio: 0.03%
  • Number Of Stocks: 508
  • Top 10 Holdings: 24.8%

 

Vanguard S&P 500 ETF (VOO) received a big endorsement when Warren Buffett himself recommended it!

The fund, as of February 29, 2020, has $500.9 billion total net assets.

VOO Holdings

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

 

No Minimum Investment

VOO is an exchange-traded fund which means there is NO minimum investment.  Investors looking to buy fractional shares can invest in Vanguard 500 Index Fund Admiral Shares (VFIAX) which is the equivalent index fund.

Normally, 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.  You no longer have to keep your money sitting idle until you have enough to purchase a full share.  This is especially beneficial when it comes to stocks with high prices like Amazon, Google, and Tesla.

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VOO Historical Returns

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

VOO vs S&P 500 Performance

 

VTSAX Profile

  • Fund Inception: 1992
  • Expense Ratio: 0.04%
  • Number Of Stocks: 3535
  • Top 10 Holdings: 18.9%

 

Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) provides investors with exposure to the entire U.S. equity market.  The U.S equity market includes small, mid, and large-cap growth and value stocks.

VTSAX was created in 1992 and currently has an expense ratio of only 0.04%.

VTSAX Holdings

VTSAX is largely made up of Microsoft, Apple, Amazon, and Google but also offers exposure to over 3500 stocks.

Over the last 10 years, VTSAX has returned an average of 10.1% per year as of March 31, 2020.

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

 

$3,000 Minimum Investment

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

You can avoid this minimum investment threshold through retirement account contributions or by investing in Vanguard Total Stock Market ETF (VTI).

 

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Index Funds vs Exchange Traded Funds (ETFs)

Exchange-traded funds (ETFs) are usually a more accessible option for new investors since they don’t have a minimum investment.  In comparison, if you can afford to invest more than the minimum, it’s usually a better option to choose admiral index funds because they have a lower expense ratio.  In this case, the expense ratio is almost the same, only differing by 0.01%.

ETFs are also available to trade at anytime the market is open.  Index funds are bought after the market closes and the price settles.  Depending on your views, this can be a good or bad thing.  For long term investors, the ability to trade anytime in the day is not a benefit.  It can encourage market timing and frequent trading.  If you have these tendencies then an index fund might be a better option for you.

Lastly, if you prefer to have every penny invested then you will like that Index funds offer fractional share buying.  On the contrary, ETFs have to be bought one full share at a time.  That can sometimes lead to money left uninvested while you wait for your next contribution.  This is more of a preference since I don’t think it will make a significant difference in your returns.

 

Which is Better VTSAX or VOO?

VTSAX and VOO are very similar investments.  Since VTSAX is an admiral share fund, it offers very low expense ratios and the ability to purchase fractional shares.  VTSAX also offers more diversification since it holds about 7 times more stocks.  VOO did slightly outperform VTSAX however, past performance isn’t an indication for future returns.

VTSAX vs VOO Graphic

For those reasons, I would give the advantage to VTSAX over VOO.

 

Is VTSAX or VOO Better for Financial Independence?

Both VTSAX or VOO can get you to Financial Independence Retire Early (FIRE).  They both have a similar return on investment and have rock bottom expense ratios.  So, either option is a great investment for financial independence.  I own both.

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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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.

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