VTSAX vs VFIAX: Which One Would You Choose?

If you are thinking of investing simply, look no further; just invest in an index fund. That may sound too simple to most folks. Financial advisors, relatives, and many others have their views. Some believe that individual stocks are the way to build wealth, and others believe that actively managed mutual funds can win.

If you are tired of analyzing stocks or allowing someone else to manage your portfolio start with index funds like VTSAX or VFIAX. Some of the best index funds on the market that we can compare are VTSAX vs VFIAX.

The Index Fund

The index fund is considered “Bogle’s Folly.” The legendary Jack Bogle, the creator of Vanguard, created the first index fund called VFINX. It tracked the S&P 500 and gave average investors the key to building wealth simpler. 

As the index fund market grew, so did the types of index funds. The Vanguard Group has created diversified index funds to help people win. Vanguard index funds are some of the best index funds on the market, and they are tax-efficient and have a long history of excellent performance. Fidelity also has some good index funds as well. They created some zero-fee funds a couple of years ago.

Creating a portfolio that will outperform the market is not an easy task. Matching the market through indexing allows you to have a diversified allocation that can be used as a passive investing strategy. 

You may wonder which one is the best. Like Warren Buffett, he believes that one that tracks the S&P 500 would be the best, like VFIAX. JL Collins, the author of “The Simple Path to Wealth,” would say VTSAX is the best. So let’s see which one wins in the battle of the index funds. 

VTSAX vs VFIAX. Let’s see which one is the best. 

VTSAX Overview:

The Vanguard Total Stock Market Index Fund (VTSAX) is a total stock market index fund that tracks the entire market of the U.S. stock exchange. It follows the CRSP US Total Stock Market index. 

It is comprised of around 4000 different companies. This may fluctuate between 3500-3800 companies depending on which companies survive and which ones dissolve with history. 

The index fund does a great job of having exposure to the entire market. Here are the top 5 sectors of the fund:

  • Technology (27.7%)
  • Consumer Discretionary (16%)
  • Industrials (13.30%)
  • Healthcare (13.10%)
  • Financials (11.5%)

The Top 10 companies that occupy 23.90% of VTSAX:

  1. Apple
  2. Microsoft
  3. Alphabet
  4. Amazon
  5. Facebook
  6. Tesla
  7. Nvidia
  8. JP Morgan Chase
  9. Berkshire Hathaway
  10. Johnson & Johnson

Over the last ten years, VTSAX has had a great run. It has averaged about 16.09%, and that is an excellent run for the previous ten years. As you continue to invest your money, you should expect it to continue to grow. 

To make this fund even more popular, Vanguard created an ETF that goes along with it. This ETF is VTI. If you want to learn more about the differences and similarities, here is an excellent article on VTI vs VTSAX. 

When looking at index funds, this one cannot go wrong. It is full of a ton of companies creating some good diversification, and excellent financials show positive growth over the last ten years. 

VFIAX Overview

VFIAX is a bit different. VFIAX is the Vanguard 500 Index Fund Admiral Shares. This is the admiral shares part of VFINX, the first index fund. This index fund tracks the S&P 500. The top 500 companies in the U.S. are a part of this index fund and weighted by the same weight as the S&P 500 weighs these companies. 

Warren Buffett is a great fan of this fund because it allows you to have exposure to the best of the best when talking about companies in the U.S.

The index fund does a great job of having exposure to the entire market. Here are the top 6 sectors of the fund:

  • Technology (27.6%)
  • Consumer Discretionary (12.40%)
  • Industrials (13.30%)
  • Healthcare (13.30%)
  • Financials (11.4%)
  • Communication (11.3%)

The Top 10 companies that occupy 29.20% of VFIAX:

  1. Apple
  2. Microsoft
  3. Alphabet
  4. Amazon
  5. Facebook
  6. Tesla
  7. Nvidia
  8. Berkshire Hathaway
  9. JP Morgan Chase
  10. Johnson & Johnson

After looking at some of these numbers, you already see a difference between VTSAX vs VFIAX. Some things are weighted higher on VFIAX. 

VFIAX also has the ETF VOO. VOO competes with many other ETFs like VUG and VTI. I would say VUG vs VOO would be comparing two of the most popular ETFs around. One is growth and one is the S&P 500. As ETFs grow in popularity, VOO is an ETF to invest your money into.

VTSAX vs VFIAX: The Similarities Between the Two

These index funds are quite similar, and there are many similarities between these two index funds.

Investment Style: 

These are both Large Blend index funds. They comprise a large percentage of large-cap stocks and growth stocks. They have a low expense ratio which is 0.04%. This allows them to keep costs to a minimum for their investors. Most mutual funds have much higher expense ratios, and those could be anywhere from 0.50%-2%. Having huge savings on expenses is excellent for the investor. 

Minimum Investment:

VTSAX vs VFIAX are both admiral shares versions of index funds in Vanguard. Vanguard, a while back ago, broke up different index funds into investor funds and Admiral share funds. They have stopped selling the investor share funds and have focused on selling the Admiral shares. 

Admiral Shares have:

  • $3,000 minimum investment

These admiral shares have also lowered the expense ratio from a 0.14% to 0.04%, as seen with VTSAX and VFIAX. 

Top 10 Holdings Are Similar

They both have the same top 10 holdings that comprise of over 20% of the portfolio. Now, VFIAX has a different bottom three companies as in the order is moved up a bit, but basically, these funds have the same top 10 holdings. 

They Have ETF equivalents

An ETF is an exchange-traded fund. So the index fund can be traded like a stock on the stock market. The index fund cannot, and it can only be traded at the end of the day when all trading occurs. 

VTSAX = VTI

VFIAX = VOO

Suppose you want to find out more about the differences between VOO and VTI. Here is a good article. VOO vs VTI: Which One Would You Choose?

The Differences Between VTSAX vs VFIAX:

Composition:: 

VTSAX is made up of about 3500-4000 different companies. It tracks the large caps, but it also has mid and small caps as a part of the portfolio. This allows more diversification within the portfolio. 

VFIAX is made up of the top 500 companies in the U.S, and it is a subset of VTSAX. So the S&P 500 happens to be some of the largest companies in the U.S. they comprise to make up about 75% of VTSAX. 

Since these are both Large blend index funds, they generally are comprised of the same companies and are close to the same weight. VTSAX just has 25% of its portfolio in small and mid-cap stocks. 

Performance Differences:

Since both of these are composed of similar companies, their performance happens to be similar. Some years the VFIAX is up while others VTSAX may be higher. Tt all depends on the year. 

VTSAX: 

1 Year: 44.06%

3 Year: 21.67%

5 Year: 18.93%

10 Year: 16.09%

VFIAX: 

1 Year: 42.88%

3 Year: 21.44%

5 Year: 18.89%

10 Year: 16.18%

VTSAX-vs-VFIAX-performance

The overall performance has been quite similar, but new companies will start off in VTSAX and later move onto the S&P 500. Tesla just got into the S&P 500 in December of 2021, and they are now one of the largest companies on both indexes. 

If you take a more extended look at the overall performance, you will see that VTSAX has outperformed in the long run. Since its inception, it has gone up 8.56% on average, and VFIAX has grown an average of 8.08%. 

As I look at this, it is hard not to choose VTSAX, but this is my opinion alone. 

VTSAX vs VFIAX: Which One Should You Choose?

This can be a hard choice. As you think about it, what would you instead choose? VTSAX holds every public company on the U.S. stock exchange, and it gives you more diversification by adding mid and small-cap stocks.

VFIAX only holds the 500 companies. At this point, the answer is simple to me, but you will have to choose for yourself. 

Both Index funds are significant to invest with. They are both some of the best index funds out there. They have a low expense ratio of 0.04%. Their ETFs can give you an entrance into the market with a lower threshold to enter in. As you can see, their performances over the long term are hard to beat. Whichever one you choose is not going to be a bad choice at all, and it will help you to create wealth and keep your investing simple. 

Final Thoughts:

Investing is not always an easy task. Picking between VTSAX vs VFIAX is not an easy task either. When you are trying to make investing simple, you simply choose an index fund that works. So the choice is yours on if VTSAX vs VFIAX works for you. 

I like to buy-and-hold index funds and allow them to do the heavy lifting for me. So by picking one will leave you a winner. I am going to go with VTSAX, but either one will help you to build wealth. 

Which one would you choose? VTSAX or VFIAX

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8 thoughts on “VTSAX vs VFIAX: Which One Would You Choose?”

  1. Great post! The breakdown is awesome information, and the ETF equivalents is great to have to. That’s something the brokerage houses don’t always provide so hopefully will find their way to your article. 🙂

    Reply
  2. I like the way you write – clear, step by step, and I can understand.

    One comment. I have no idea which is better – VTSAX or VFIAX.
    Just don’t spend 5 – 10 years thinking about which is better.
    Start investing TODAY!!!

    Reply
  3. Great info. I went with VTSAX years ago but didn’t look hard at VFIAX. While I’ve seen some numbers (including Morningstar’s rating) that VFIAX is slightly better, I’m sticking with VTSAX because I feel ~4,000 companies is better than the S&P 500 in the event of global trade disruption. Which has looked and been happening for some time now. I also dislike the fact a single scandal at a major player like Apple has even more weight in VFIAX. I don’t think you can go wrong either way, we’re all at the mercy of world events, but prepandemic I probably would’ve/should’ve gone/said VTSAX. Today I’m sticking with my original pick.

    Reply
    • That is very true indeed. The Yield of VTSAX is 1.25% and the Yield of VFIAX is 1.33%. These are not the biggest dividend funds, but dividends to help buy more stocks in the long run. The power of compounding is great.

      Reply
  4. This is a GREAT article. These were the two index funds I am considering when planning for a Vanguard UTMA for my 2 young kids (ages 4 and 5). I am still torn between and am actually considering getting both mutual funds with a monthly contribution of $100 each.

    Do you think this is a good idea or is it just duplicating efforts with no real difference in outcome?

    Reply
    • Hi Pablo,

      I think both funds are so similar that it would be best just to pick one and go with it. Keeping it simple is how I like to do my investing. The top companies in both funds are very similar companies. If I was doing it, I would pick one and stick with it. (Personally, I like VTSAX for more diversification.)

      That’s great you are working on a UTMA for your kids. You are creating a great generational tool for them, and they will be so glad that you started them off investing early on.

      Reply

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