Understanding the Differences Between Vanguard’s VTSAX and VFIAX

by | Nov 29, 2023 | Vanguard IRA | 19 comments

Understanding the Differences Between Vanguard’s VTSAX and VFIAX




In this video we are breaking down 2 of the top index funds in the world: The Vanguard S&P 500 Index Fund (VFIAX) and the Vanguard Total Stock Market Index Fund (VTSAX).

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If you’re new to investing or have been considering adding Vanguard funds to your portfolio, you may have come across two popular options: VTSAX and VFIAX. While both of these funds are offered by Vanguard and invest in the same market, there are some key differences between the two that you need to be aware of before making a decision.

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VTSAX, also known as the Vanguard Total Stock Market Index Fund Admiral Shares, is a mutual fund that aims to track the performance of the CRSP US Total Market Index. This index represents approximately 100% of the investable U.S. stock market and includes large, mid, small, and micro-cap stocks regularly traded on the New York Stock Exchange and Nasdaq.

On the other hand, VFIAX, the Vanguard 500 Index Fund Admiral Shares, seeks to track the performance of the S&P 500 Index. This index includes 500 of the largest U.S. companies, representing approximately 80% of the total market capitalization of the U.S. stock market.

The main difference between the two funds lies in their underlying index. VTSAX covers the entire U.S. stock market, including small and mid-cap stocks, while VFIAX focuses exclusively on the 500 largest companies in the market.

One implication of this difference is that VTSAX offers a more diversified exposure to the U.S. stock market, including exposure to companies across different market capitalizations. This can potentially provide better risk-adjusted returns and reduce the impact of individual stock performance on the overall portfolio.

On the other hand, VFIAX’s exclusive focus on large-cap stocks means that it may have a more concentrated exposure to the performance of these larger companies. This can result in higher volatility and the potential for larger swings in the fund’s performance, as the performance of the 500 companies in the S&P 500 can have a significant impact on the overall fund performance.

When deciding between VTSAX and VFIAX, it’s important to consider your investment objectives, risk tolerance, and portfolio diversification. If you’re looking for broad exposure to the entire U.S. stock market with a higher degree of diversification, VTSAX may be the better option for you. On the other hand, if you have a preference for large-cap stocks and are comfortable with potentially higher volatility, VFIAX may be the more suitable choice.

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It’s also worth noting that both funds have low expense ratios, meaning that they come with low fees, making them cost-effective options for long-term investment. Ultimately, the choice between VTSAX and VFIAX will depend on your individual investment goals and risk appetite.

In conclusion, while VTSAX and VFIAX are both popular Vanguard funds that offer exposure to the U.S. stock market, it’s important to understand the differences between the two before making a decision. By considering factors such as diversification, volatility, and your investment objectives, you can choose the fund that best aligns with your long-term financial goals.

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19 Comments

  1. @AverageJoeInvestor

    What's up everybody! Happy Tuesday! Make sure to leave your $0.02 in the comments and I will respond! =)

  2. @victoriajonas44

    Real estate investors losing money is music to my ears. They are a major reason why the real estate market is the way that it is now.

  3. @dimmacommunication

    My Italian bank/broker doesn't let me buy the vanguard stock 🙁

  4. @theawokenone

    Thank you for the explanation, I do appreciate that.

  5. @jasondupuis7506

    Can you give us a percentage of how much you contribute to each of the large medium small cap and international? Say if you had $10,000 how would you split it up. Thanks

  6. @txrock

    Joe, my wife, and I have been watching your well-thought-out videos since we began investing in the market almost a year ago now. There is an ETF I think you will find has been flying under the radar that really performs well. I would love to see you share an analysis of COWZ ETF. Even though it is a Value play, It performs better than many growth stocks/ETFs and it pays a reasonable dividend. The real catch is it even performs in today's volatile market. Thanks buddy

  7. @bucketlistdestinations4228

    Good Stuff Joe, Thank you. Any thoughts on WLKP? Its starting its third year with no dividend increases

  8. @davejohnson3822

    Uncle Joe- My favorites are your Dividend ETF''s, Dividend Capture, Options and ALL the other things rather then a Market Index. But thanks for putting it out there anyway : )

  9. @that70shome19

    Great video! Thanks so much for this. Would love to know the funds you split your investments across.

  10. @papytwth

    5:42 a.k.a. RSP which has an NER of 0.20%

  11. @pep44ito

    Good breakdown A.J.! Which 3 funds are you in(mentioned large, mid, small) that youre equally in? Thanks!

  12. @harikkdi

    Hi Average Joe – Great informational video. There is another fund from Vanguard called VLCAX which is the large cap index fund similar to the S&P 500 but has 100 more companies. Where does that fall and how does it compare with these 2 funds? Thanks.

  13. @Mike-uz1hy

    Hey Joe kind of a random question, did you ever do a compare vid of QYLD to JEPI? I was looking and I couldn't find anything..you should do one of those I'm curious your thoughts, just an idea..

  14. @bobbartholomew85364

    I've been buying ITOT – Blackrock's SP1500 ETF. It tracks the Dow Jones U.S. Total Stock Market index pretty closely.

  15. @Bangpaulxu

    Another banger video!!! Thanks!!

  16. @1manpanama

    Thanks for the informative video. Out of curiosity, since you mentioned you mix of small, mid and large cap versus the two you highlighted, how does your way's returns match the other two given the same example?

  17. @kevinsnyder2298

    Do your homework folks. You want as much of these funds into your tax deferred IRA's instead of Brokerage accounts that can be taxed and inherit stock fees.
    Vanguard just broke it off in a bunch of peoples a$$e$.

  18. @harryallenpearce89

    Hello Average Joe Investor.

    I’m currently 100% VTSAX/VTI.

    I just can’t bring myself to buy a foreign market etf because I believe I’m betting against America. I can’t bring myself to buy bonds because I have a 20 year time frame, and I don’t see that being very prosperous.

    If I run a Warren Buffett 90/10 to a more traditional 60/40 stock/bond, is it reasonable to use a good dividend etf like VYM or SCHD instead of Bonds? (I know, not financial advice, just a curious question)

  19. @e5toro7008

    Me:
    Roth IRA: FXAIX
    Brokerage: VOO

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