VTSAX and VTI are two total market index funds, meaning that they track the overall performance of the U.S. stock market. Total market index funds give you a simple way of diversifying your investment by putting your money into one fund instead of buying many individual shares.
VTSAX and VTI give you the same level of diversity, but the two funds aren’t exactly the same. VTSAX is a mutual fund and VTI is an exchange-traded fund.
This fund type difference translates into different minimum investments and trading models. These differences can matter when deciding which total market index fund you should choose.
VTSAX vs. VTI
Vanguard, an investment management company, manages both VTSAX and VTI. The two funds are similar in many ways. For example, both funds are index funds, which means they passively invest in assets tracked by a specific market performance indicator. They also have almost identical historical performances. Let’s look at how they compare.
|Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)||Vanguard Total Stock Market Index Fund ETF (VTI)|
|Inception||Nov. 11, 2000||May 24, 2001|
|Investment vehicle type||Mutual fund||Exchange-traded fund|
|Minimum investment||$3,000||One share ($197.53 as of Sept. 14, 2022)|
|Net assets||$295.0 billion as of Sept. 14, 2022||$269.2 billion as of Sept. 14, 2022|
|Trading model||Trades once per day after market closure at 4 p.m. ET||Trades during market trading hours, often between 9:30 a.m. to 4 p.m. ET|
|Historical performance||12.70% over a 10-year period ending September 2022||12.70% over a 10-year period ending September 2022|
What is VTSAX?
The Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) is a mutual fund managed by Vanguard. Mutual funds pool money from several investors to buy a variety of assets and securities.
VTSAX uses a passive index fund model, which means VTSAX management doesn’t try to pick specific stocks to beat the market’s returns. Instead, this fund tracks the U.S. stock market as a whole and aims to mimic its returns.
The fund invests in 4,076 individual stocks. The 10 largest companies the fund invests in are:
- Alphabet (Google’s parent company)
- UnitedHealth Group
- Berkshire Hathaway
- Johnson & Johnson
- Meta Platforms (Facebook’s parent company)
- Exxon Mobil
The fund, as with most Vanguard funds, aims to keep the expense ratio as low as possible. The expense ratio represents management costs that reduce your returns. VTSAX’s expense ratio is 0.04% as of September 2022, which makes it a cost-efficient mutual fund to invest in.
What is VTI?
The Vanguard Total Stock Market ETF (VTI) is an exchange-traded fund (ETF) managed by Vanguard. ETFs are funds that pool money from many investors to invest in stocks, bonds, and more. ETFs trade on the public stock market in a similar manner to traditional stocks.
VTI fund managers passively invest in stocks by tracking the entire U.S. stock market, keeping this ETF’s performance closely connected to the stock market conditions.
VTI invests in companies of different sizes and market values, which are often referred to as their market caps or market capitalizations. The fund includes 4,076 stocks of small-, mid-, and large-cap companies. The top 10 sectors in VTI by allocation size are:
- Consumer discretionary
- Health care
- Consumer staples
- Real estate
VTI maintains a low expense ratio of 0.03%, which means investing in this fund costs $3 a year for every $10,000. This expense ratio is among the lowest in the market and should have minimal effect on your annual returns.
What both investment funds excel at
Both VTSAX and VTI are well-known broad market index funds commonly used in many stock portfolios. In fact, several robo-advisors use one of these funds when building out portfolios for their customers.
Low expense ratios
Both funds offer low-cost expense ratios. VTSAX has a 0.04% expense ratio, and VTI has a 0.03% expense ratio. Both ratios are slightly above 0% and translate to merely $4 a year for VTSAX and $3 a year for VTI on every $10,000 invested.
High level of diversification
Using VTSAX or VTI as a part of your investment portfolio is a simple way of adding more diversification since each fund provides a wide range of stocks and market sectors. With 4,076 different stocks in each fund, your money is spread out across the U.S. stock market.
Improved tax efficiency
Neither VTSAX nor VTI attempt to beat the stock market because they use a passive investment strategy. This means both funds don’t incur as many taxable events.
A taxable event is an event that increases the taxes you pay to the IRS. One example is sales that result in financial gain, which may lead to capital gains tax.
3 key differences between VTSAX and VTI
Although VTSAX and VTI hold virtually the same assets, they are different in three important ways.
1. Minimum investment
You can invest in VTSAX once you meet the minimum initial investment of $3,000. Accessing VTI is much easier, as you only need enough money to buy a single share that costs $204.45 as of Sept. 10, 2022.
Winner: VTI is easier to access, especially for new investors. This is because the minimum amount of money required to invest in it is a single share price, whereas VTSAX requires at least $3,000.
2. Trading model
VTSAX is one of the Vanguard mutual funds. Mutual funds exchange once per trading day after the market closes. Any transactions submitted during the day are executed once a day at 4 p.m. ET.
VTI is an exchange-traded fund. ETFs trade in real-time throughout the day. You can buy or sell the fund’s shares several times daily without waiting for the closing price. If you’re a short-term active trader, you may be able to take advantage of intraday price movements.
Winner: VTI is an ETF that trades more regularly than mutual funds, which allows more flexibility when buying and selling the fund’s shares.
3. Recurring automatic investments
Regularly placing a money mount in your investments is a popular strategy long-term investors use known as dollar-cost averaging.
For example, you can add $500 a month to the VTSAX mutual fund because you can buy partial shares of a mutual fund.
On the other hand, you may not be able to invest exactly $500 in the VTI ETF because ETFs traditionally trade in full shares. At $204.45 per share, you can buy two shares for $408.90 and have $91.10 left in cash.
However, some of the best brokerage accounts allow fractional shares, which should allow you to invest the entire $500 in VTI and get about 2.56 shares.
Winner: VTSAX can include the full amount of your recurring investments, which enables you to invest your money regardless of the number of shares it can buy. VTI only includes the full amount of your investments if you use a fractional shares brokerage.
Which investment fund should you choose?
Choosing between VTSAX and VTI may feel like a coin flip. Both investments are well-managed and come with exceptionally low expense ratios. Deciding which you prefer comes down to a few factors.
If you want to invest less than $3,000 in one of the two funds, you should choose VTI over VTSAX because VTSAX requires a $3,000 minimum. You may also prefer VTI due to its slightly lower expense ratio at 0.03% compared with 0.04% for VTSAX.
On the other hand, you may prefer VTSAX if you don’t have access to fractional shares. VTSAX allows you to invest the entire amount of money you put into it, regardless of how many shares this amount can buy.
Ultimately, with low expense ratios and virtually identical investments, both VTSAX and VTI are attractive options that can fit most portfolios. Consider your investment goals and personal finance when choosing between both funds.
Does it make sense to own both VTSAX and VTI?
It usually does not make sense to own both VTSAX and VTI. They both contain the same general investments, so owning both doesn’t give you a clear advantage and it overly complicates your portfolio.
Is it easier to invest in VTSAX or VTI?
It’s easier to invest in VTI than in VTSAX because VTI has a minimum investment of one share, priced at $204.45, as of Sept. 10, 2022, while VTSAX has a minimum initial investment of $3,000. Keep in mind that you can also use a brokerage account that allows fractional shares to buy less than one VTI share.
Can I transfer from VTSAX to VTI?
It is possible to transfer funds from VTSAX to VTI without a taxable event, but it isn’t something you can do on your own. Instead, you must call Vanguard’s customer service at 877-662-7447 and speak to a representative to have them assist with the process.
VTSAX and VTI are similar investments that could diversify your portfolio. The biggest difference is the investments' technical structure, with VTSAX being a mutual fund and VTI being an ETF.
Learning how to invest money in VTSAX or VTI is simple and doesn’t require much technical knowledge. You can invest in one or both funds using a brokerage account or an investment app. Explore the best investment apps to get started.
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