VTSAX vs VFIAX

Quick Answer: VTSAX and VFIAX differ in the number of companies and the types of companies that they hold in their portfolios.

Benzinga compares these two index funds, providing insights into which one performs better. Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) and Vanguard 500 Index Fund Admiral Shares (VFIAX) are well-regarded Vanguard index funds. Index funds closely follow a set benchmark and can be constructed as mutual or exchange-traded funds (ETF). Although distinctly different, the two index mutual funds offer similarities that may benefit many investors. Compare and research the two index funds before investing. 

VTSAX and VFIAX

Although VTSAX and VFIAX are both provided by The Vanguard Group, they each offer different levels of risk exposure and initial investment. Research the companies that each index fund offers to gain a better idea about the composition of each portfolio. 

VTSAX: VTSAX is also called the Vanguard Total Stock Market Index Fund Admiral Shares. This large-blend fund consists mainly of technology stocks but offers strong portfolio diversification into other sectors such as financials and consumer discretionary. It’s a relatively riskier index fund, but that risk may offer a higher reward. For example, VTSAX often performs highly in terms of annual returns. 

VFIAX: VFIAX is also known as Vanguard 500 Index Fund Admiral Shares. It’s an affordable option for people who are looking to invest in 500 of the largest companies on the market. The investment is a large blend and includes just over 500 different stocks. An added benefit is that the index fund is highly diversified, which helps to lessen the amount of risk exposure. The index fund is primarily composed of information technology stocks such as Meta Platforms Inc. (NASDAQ: FB) and Apple Inc. (NASDAQ: AAPL) as well as other sectors. In addition, VFIAX invests in additional sectors such as consumer discretionary and healthcare. 

Key Similarities

Although not obvious, VTSAX and VFIAX have more in common than just being offered by Vanguard. These two index funds are similarly strong in diversification and offer comparable tax benefits as well as investments in similar companies. 

Type of investment: VTSAX and VFIAX are both index mutual funds offered by Vanguard. 

Market-cap-weighted: Both VTSAX and VFIAX are market-cap-weighted. A capitalization-market-weighted index is an index where items are weighed relative to total market capitalization. 

Similar holdings: VFIAX and VTSAX both hold similar assets. For example, VTSAX and VFIAX have the same top two largest holdings which are Apple, Inc. and Microsoft, Corp. and then the two indexes vary on other companies. 

Low turnover rate: Both index funds offer low rates of turnover. As of December 2021, both index funds had turnover rates that were stated as below 10% at that time. 

ETF equivalents: VFIAX requires an initial investment of $3,000 that could dissuade potential investors. Luckily, VFIAX also offers a similar ETF called Vanguard S&P 500 ETF (VOO). The VOO is part of the Vanguard Equity Index Group and does not require a heavy initial investment. 

The VTSAX offers a special feature where the index fund can also be purchased as a similar ETF called the Vanguard Total Stock Market (VTI). The ETF is an excellent alternative option to VTSAX because it is similar but can be purchased at an individual level. Unlike VTSAX, which has a minimum starting investment of $3,000, the alternative VTI ETF requires no minimum investment. 

Overall, both VTSAX and VFIAX offer comparable ETF equivalents that provide an alternative method of investing. Both index funds are offered as ETF equivalents, which means an interested investor who likes the companies placed within VTSAX or VFIAX could invest in their ETF alternatives and gain the benefits that can be received by investing in an ETF. 

Key Differences

Although VTSAX and VFIAX are generally similar, key differences make them stand out. The one you choose will depend on the features that appeal to you and your level of risk tolerance. 

Many believe VFIAX will outperform VTSAX: Warren Buffett mentioned that he believes that indexes that track the S&P 500 have excellent growth potential. VFIAX closely tracks the S&P 500 and may have the potential to slightly outperform VTSAX in the future. 

VTSAX is a little more flexible: VTSAX offers a higher level of flexibility than VFIAX. The VTSAX tends to have a more affordable price per share with more flexibility and price purchasing power. 

Long-term investing can favor VTSAX: Over time, VTSAX has the potential to benefit the long-term investor. This index fund works best with investors that tend to be more risk-tolerant. Although past performance is no guarantee of future results, VTSAX has consistently increased over the years and has gained over 200% in its lifetime.

VTSAX vs VFIAX: Top Ten Holdings

Here are the top ten holdings for each index fund. 

VTSAX

1. Microsoft Corporation (6.22%)
2. Apple Inc. (5.40%)
3. NVIDIA Corporation (3.75%)
4. Amazon.com, Inc. (3.33%)
5. Meta Platforms, Inc. (2.20%)
6. Alphabet Inc. (1.66%)
7. Berkshire Hathaway Inc. (1.47%)
8. Alphabet Inc. (1.38%)
9. Eli Lilly and Company (1.30%)
10.  Broadcom Inc. (1.17%)

Source: VTSAX Holdings

VFIAX

1. Microsoft Corporation (7.18%)
2. Apple Inc. (6.17%)
3. NVIDIA Corporation (4.56%)
4. Amazon.com, Inc. (3.75%)
5. Meta Platforms, Inc. (2.54%)
6. Alphabet Inc. (1.91%)
7. Berkshire Hathaway Inc. (1.74%)
8. Alphabet Inc. (1.63)%
9. Eli Lilly and Company (1.40%)
10.  Broadcom Inc. (1.33%)

Source: VFIAX Holdings 

Choosing the Right Index Fund for You

Trying to decide between VTSAX vs VFIAX? It boils down to your investment goals and risk tolerance. Here's a breakdown to help you choose:

• Growth Potential & Diversification: VTSAX tracks the entire US market, including smaller companies. This means potentially higher returns and more diversification, but also slightly more ups and downs (volatility).
• Stability & Proven Performance: VFIAX sticks to the S&P 500, which includes the biggest US companies. This offers a more stable investment with a solid track record, but potentially lower growth compared to VTSAX.
• Fees: Both funds have low fees, but VFIAX has a slight edge here.

The Takeaway:

• Want a broader market exposure and potentially higher returns? Choose VTSAX.
• Value stability and a proven track record? VFIAX might be a better fit.

Benefits of Index Funds

Index funds tend to offer lower fees as well as certain tax benefits. The low fees follow the logic that index funds closely follow a set benchmark, which takes out the need for extensive research or analysis. 

Lower fees are also a result of passive management, which means select index funds such as ETFs require less active management than other more actively managed investments. ETFs differ from mutual funds because ETFs offer more flexibility. For example, ETFs are traded similarly to stocks and can be purchased and sold during trading hours, which makes them more liquid. In addition, ETFs can be more tax-efficient, which might prove beneficial for an investor. 

Because of the extensive amount of diversification offered in an index fund, they also are better guarded against risk. Diversification allows index funds to contain a wider variety of investments. Index funds tend to track various assets while noting their performance as a group. 

In addition, index funds offer excellent value for long-term investing. Index funds often offer interest and dividends that provide consistent growth over an extended period. Index funds can be beneficial for holding over an extended period because they are closely linked with the market. Given time, the market tends to grow and increase, which works in the favor of index funds that are held over time. In general, index funds tend to average larger annual returns while also offering a certain level of risk protection. 

Compare Index Funds Brokers

Benzinga offers insight into the different kinds of index funds that are available for investing. Like most investments, there is no guarantee of how an index fund will perform. Research the different options and speak with a financial advisor before investing. 

Frequently Asked Questions