VTSAX vs VFIAX: Which Index Fund Is Right for You?

When it comes to the VTSAX vs VFIAX showdown, these two popular index funds are similar in many ways. They both have low expense ratios and are managed by Vanguard. However, there are some key differences to consider before investing.

So, which one is right for you? Let’s find out.

VTSAX Overview

VTSAX is Vanguard’s flagship index fund. It tracks the entire US stock market, including small-cap, mid-cap, and large-cap stocks. This makes it a very diversified investment.

VTSAX’s top holdings include Apple (6.06%), Microsoft (5.09%), and Amazon.com (2.83%).

VFIAX Overview

VFIAX is Vanguard’s S&P 500 index fund. It tracks the 500 largest US companies by market capitalization. This includes large-cap stocks like Apple (7.15%), Microsoft (6.01%), and Amazon.com (3.38%).

However, VFIAX does not include small-cap or mid-cap stocks.

VFIAX vs VTSAX: Basic Similarities and Differences

We’ll start with the similarities between the two, since there are quite a few.

How Are They Similar

First of all, both are index mutual funds managed by Vanguard, which means you’re in good hands no matter which one you choose. Vanguard is one of the largest and most well-respected investment firms in the world.

Second, both VTSAX and VFIAX have a low expense ratio of only 0.04%. This is incredibly low compared to other mutual funds. For example, Fidelity’s expense ratio is 0.015%, whereas most mutual funds have an expense ratio of around 0.50%.

And finally, both offer the same minimum investment of $3,000 and have the same top three holdings (Apple, Microsoft, and Amazon).

How Are They Different

Now, let’s talk about the differences. To make things easier, we created a VTSAX vs VFIAX graph where we listed the key distinctions.

Target Index

The biggest distinction between the two is that VTSAX tracks the entire US stock market while VFIAX only tracks 500 US companies.

So which one is better for investment, VFIAX or VTSAX? If you’re looking for a long-term investment that will save you from inflation, VTSAX is a better choice, since it’s more diversified. However, if you’re into immediate gains, VFIAX may be a better option due to being less volatile.

In addition, VFIAX’s narrower focus may make it a bit easier to track and understand, as you’re only dealing with the 500 largest companies.

Number of Equity Holdings

VTSAX is more diversified than VFIAX. Our VTSAX review shows it holds 4,097 equities, while VFIAX has only 503 equity holdings.

At the time of writing, VTSAX’s top five investment sectors are:

• Technology (24.48%)     
• Healthcare (14.30%)     
• Financial Services (13.00%)     
• Consumer Cyclical (11.31%)     
• Communication Services (7.65%)

On the other hand, VFIAX’s top five investment sectors include:

• Technology (25.28%)     
• Healthcare (14.41%)     
• Financial Services (12.76%)     
• Consumer Cyclical (11.27%)     
• Communication Services (8.42%)

Assets in Top 10 Holdings

When choosing between VTSAX or VFIAX based on their holdings, you should know that VFIAX has a higher percentage of assets in its top ten holdings.

VFIAX’s top ten holdings make up 27% of the fund, while VTSAX’s top ten holdings account for 22%.

To break it down further, VTSAX has the following distribution:

• Apple (6.06%)
• Microsoft (5.09%)
• Amazon.com (2.83%)

On the other hand, VFIAX has the following distribution:

• Apple (7.15%)
• Microsoft (6.01%)
• Amazon.com (3.38%)

Average Annual Returns Since Inception

If we make a VTSAX vs VFIAX performance comparison, we can see that VTSAX has a slightly higher average annual return since inception — +7.20% vs +6.90%. As a result, VTSAX has a somewhat better return over time.

Net Assets

VTSAX is much bigger than VFIAX. It has $1.2 trillion in assets, while VFIAX has $780.8 billion. This is to be expected, as VTSAX tracks the entire US stock market.

ETF Equivalents

The VTSAX ETF equivalent is VTI (Vanguard Total Stock Market Index Fund), while VFIAX’s equivalent is VOO (Vanguard 500 Index Fund).

The main difference between VTSAX and VTI is that the former is an index fund while the latter is an exchange-traded fund (ETF).

VTI gives investors the same market exposure as VTSAX but with a reduced expense ratio of 0.03%.

The VFIAX ETF equivalent, VOO, also has a lower expense ratio (0.03%), and it works as an exchange-traded fund, whereas VFIAX works like a mutual fund.

Conclusion

So, which one should you choose? It depends on your investment goals and objectives. For example, if you want to find a diversified investment with exposure to small-cap, mid-cap, and large-cap stocks, go with VTSAX.

On the other hand, VFIAX may be a better fit for investors who are looking for a long-term investment that tracks the 500 largest US companies.

FAQs

Is VTSAX a good investment?

VTSAX can be a good investment since it has a low expense ratio of 0.04%, which means you’ll save on fees, and it tracks the entire US stock market.

On the other hand, VTSAX has a high minimum investment requirement. In other words, to get started, you’ll need $3,000. This makes it inaccessible to small investors.

Is VFIAX a good buy now?

VFIAX can be a good buy since it has been consistently profitable since its inception, with five years of consecutive yearly gains resulting in an annualized total return of 16.74%.

However, VFIAX’s 3-year standard deviation is 17.57%, which is higher than the overall average of 15.5%. This makes VFIAX more volatile than its competitors.

Which one is better, VTSAX or VTI?

VTI is better than VTSAX in terms of minimum investment requirements, since you can purchase it for the price of a single stock. VTSAX, on the other hand, has a minimum investment requirement of $3,000.

VTI is also better than VTSAX in terms of expense ratio — 0.03% vs 0.04%.

So, if you want to trade quickly and frequently, VTI might be a good fit for you. However, if you want to keep your investment for a more extended period, VTSAX is the way to go.

Just like with the VTSAX vs VFIAX dilemma, the decision will come down to your investment goals and objectives.