With over $1 trillion in total net assets, Vanguard’s Total Stock Market funds (VTSAX and VTI) are the most popular investment funds on the planet. VTSAX is an index fund and VTI is an exchange-traded fund (ETF). VTSAX and VTI are similar but have a few key differences.
VTSAX and VTI will provide the same returns because they both track the same CRSP US Total Market Index by holding the same diversified portfolio of stocks. The key differences between VTSAX and VTI are in their expense ratio, minimum initial investment, and the way the investment funds trade.
VTSAX and VTI are designed to be virtually indistinguishable aside from the fact that VTSAX is an index fund and VTI is an ETF. Both VTSAX and VTI represent the same professionally managed basket of individual stocks.
Continue reading to see detailed breakdowns and comparisons of VTSAX and VTI.
Why is the Vanguard Total Stock Market so popular?
It’s no secret within the financial independence community as to the popularity of VTSAX or VTI. There are many qualities that investors look for in an index fund when making investment decisions.
Here are 7 reasons why the Vanguard Total Stock Market Funds are so popular:
Low expense ratio’s
Set it and forget it
A reputation of quality
Not an actively managed mutual fund
A history of increasing in value over time
VTSAX is the most popular investment in the personal finance community because it has a long history of average rates of return. When calculating your financial independence target number, you must assume an average rate of return. VTSAX provides a fairly reliable average rate of return based on historical performance.
Which is better, VTSAX or VTI?
VTSAX and VTI are virtually the same investment. VTSAX will provide the same returns over time as VTI because they both aim to track the same CRSP US Total Market Index by holding the same diversified portfolio of stocks. The differences in VTSAX and VTI are in their minimum initial investment and the way they trade during or after market hours. It’s for these reasons that neither VTSAX nor VTI are a better investment than one another.
Consider discussing these options with a Certified Financial Planner prior to making any investment decisions.
Vanguard Total Stock Market Index Fund (VTSAX)
|Number of Stocks||3755|
|Top 10 Holdings||22.1%|
VTSAX was created in 1992 and was designed to provide investors exposure to the entire U.S. stock market by tracking the performance of the CRSP US Total Market Index.
Investing in VTSAX is akin to investing in the total American economy. The low-fee nature and broad exposure of VTSAX have allowed it to become the most popular index fund in the world.
Please visit the Vanguard VTSAX webpage for more information on VTSAX.
VTSAX historical returns
Here are the returns that VTSAX has posted over the 1-, 3-, 5-, 10-year, and since inception:
Since Inception (1992): 8.28%
VTSAX has returned 8% per year on average over the long run. This type of dependable figure is used to calculate your financial independence number or the number at which you will be able to pay yourself in retirement instead of relying on earned income from an employer.
VTSAX Minimum Investment
VTSAX has a minimum investment of $3,000. Each subsequent investment can then be made in lesser purchases. The minimum investment of VTSAX can be waived if you’re employer provides access through their 401k plan.
How does VTSAX trade?
VTSAX is traded like a mutual fund where the transaction is settled once per day when the market closes at 4 p.m. ET.
Vanguard Total Stock Market Exchange Traded Fund (VTI)
|Minimum Investment||1 Share|
|Number of Stocks||3755|
|Top 10 Holdings||22.1%|
VTI was created 9 years after VTSAX but was very much created in the image of VTSAX. VTI also seeks to track the performance of the CRSP US Total Market Index and is made up of the same basket of stocks as VTSAX.
Please visit the Vanguard VTI webpage for more information on VTI.
VTI historical returns
Here are the returns that VTI has posted over the 1-, 3-, 5-, 10-year, and since inception:
Since Inception (2001): 8.72%
VTI Minumum investment
VTI does not have a minimum investment like a mutual fund and can be purchased for the price of a single VTI share.
How does VTI trade?
VTI is traded much like an individual stock, on a per-share basis during market hours.
What stocks do VTSAX and VTI hold in their portfolio?
At the time of the last update per Vanguard on 3/31/2021, here are the top 10 holdings within VTSAX and VTI:
Berkshire Hathaway Inc.
JPMorgan Chase & Co.
Johnson & Johnson
VTSAX vs VTI - The Verdict
VTSAX and VTI are virtually indistinguishable and common investors would be well served in owning either of these funds for the long haul. I personally have dedicated a large portion of my retirement investment to VTSAX through my previous employer’s 401k.
VTSAX and VTI are just a few of the many ways to own a slice of the U.S. economy. All major investment brands have their version of the Total Stock Market Index Fund. Fidelity, Schwab, etc.
If you’re interested in achieving financial independence by retirement age or sooner, then debating between VTSAX and VTI is not going to make much of a difference. They’re both quality investments backed by a reputable company and I’m confident they’ll be around for years to come.