vtsax vs vti

VTSAX vs VTI: Best Vanguard Total Stock Market Fund? (2022)

This guide compares two popular Vanguard funds – VTSAX vs VTI.

These are both passively managed Vanguard index funds with low costs and broad diversification.

Really, there’s not a dramatic difference between the two products, but you want to make sure you select the investment vehicle that properly reflects you’re underlying liquidity demands.

VTSAX vs VTI – Why Vanguard?

“Why do you always write articles about Vanguard? Why not Fidelity or Charles Schwab?”

Well, I actually believe both of these companies have wonderful business models and customer service.

However, I have always used Vanguard as my asset custodian because their relentless focus on the individual investor shines bright through all their actions.

VTSAX vs VTI - Why Vanguard?

They have extremely low investment fees (even for active management), a user-friendly app and website, and a rich tradition of providing more value than you can get anywhere else.

I opened my first Roth IRA with Vanguard four years ago, and I have nothing but positive things to say.

In fact, anyone who asks me a question regarding investing is directed towards Vanguard 100% of the time.

Warren Buffett has even called Vanguard one of the greatest financial services companies of all time. He knows a thing or two about the subject matter, so I get my info directly from the horses’ mouth.

 

Zero-Sum Game

The concept of a zero-sum game starts with the understanding that at any one time, the holdings of all investors in a particular market make up that market.

For every invested dollar that outperforms the total market over a given period, there must, by definition, be another dollar that underperforms.

Another way of stating this is that the asset-weighted performance of all investors, both positive and negative, will equal the overall performance of the market.

Investors pay multiple investment fees, such as marketing fees, sales-loads, 12b-1 fees, taxes, and account administration operating expenses. These fees all work together to lower overall investment returns.

Cost and asset allocation are really the only two variables retail investors can control. Asset allocation is tricky, but by keeping costs low, investors can guarantee they capture the overall market return.

This is why it is almost impossible for active funds to outperform the index. Fund managers cannot consistently generate enough alpha to recoup their higher expense ratios.

Well, both VTSAX and VTI have some of the lowest expense ratios in the entire investment industry, which is wonderful for investors!

Zero-Sum Game

VTI – Total Market ETF

VTI is an ETF tracking the entire US stock market, which is partially comprised of every publicly listed company.

This is different than VOO, which just tracks the 500 largest US companies.

Now, in reality, you are not going to receive indirect ownership in every US-listed company (some of these stocks are too illiquid to put in the fund). You will have a heavy concentration (22.9%) in the following stocks.

vtsax vs vti holdings will be the exact same
Source: Vanguard

Regardless, VTI provides exposure to large, mid, and small-cap equities diversified across sectors, growth, value, and economic cycles.

Market cap is simply the number of shares outstanding multiplied by the price per share. For example, a firm with 500 shares, trading at $4, would have a $2,000 market cap.

Vanguard notes the fund’s mission and investment strategy “seeks to track the performance of the CRSP US Total Market Index.”

I would recommend this fund for long-term investors (20+ year horizon) because the volatility will be higher than balanced funds for retirees.

VTSAX – Total Market Index Fund

VTSAX is an index fund tracking the entire US stock market, identically similar to VOO’s underlying investments.

So, the only distinction is VTI is an ETF, and VTSAX is an index fund. This is not merely a distinction without a difference though!

You’ll notice that the fund owns 3513 stocks, which would be impossible for any individual to own without a mutual fund.

Well, unless you’re Jeff Bezos, and my guess is you’re probably not if you’re reading this article!

This index fund comprises about 100% of the US stock market by market value. So, this is the best way to own the entire market (not just the S&P 500).

VTSAX is one of Vanguard’s flagship funds, and it is always within their top 10 most popular investments.

It may be down a little on the year, but it has a decent track record going back to 2000.

vtsax vs vti investment returns will be the exact same, disregarding fees

VTI Pros

Again, as I mentioned earlier, there isn’t a huge difference in VTSAX vs VTI, but these are a few major pros.

  • Intraday Trading
  • Lower Investing Fees
  • Underlying Liquidity
  • No “Minimum” Investment

Intraday trading means that a submitted order can be executed at any point during NYSE trading hours. This would be from 9:30 am-4:00 pm ET.

For example, if you want to liquidate or add to your VTI position at 11 am, you can. VTSAX doesn’t have the same flexibility; it only reduces your exposure upon trading close and NAV settlement.

This makes it easier for investors to know their entry and exit price for the fund or set limit/stop orders. Now, intraday trading could be viewed as a negative, but I believe it’s generally positive.

Because VTI has access to intraday trading, it’s trading volume and underlying liquidity are superior. You can sell shares at a click and move that capital into another investment strategy instantly. I don’t recommend day-trading, but VTI allows you the option.

Additionally, VTI has a lower expense ratio than VTSAX, but this only results in a couple of dollars in annual cost savings.

The difference is ~0.01%, but if you have a large account balance it could be worth the hassle of switching funds.

The biggest pro for VTI is no “minimum investment”. All you have to do is buy one share, but VTSAX requires a $3,000 minimum investment.

Not a great way to dip your feet into the investing world!

VTI Cons

When brainstorming for this article, I really tried to deliver a comprehensive list of VTI downsides, but there aren’t many. I could only come up with one valid complaint.

VTI has no buffer to prevent you from being overly emotional and day trading positions based on short-term volatility or fear.

For example, when the US stock market lost over 30% in March 2020, it would be too easy to cash out your position if you’re a long-term investor.

Because VTSAX has no intraday trading, it could prevent rash, emotional investment decisions.

I’ll admit, this downside of ETFs is one of John Bogle’s (Vanguard’s Founder) biggest complaints.

Bogle believed in buying the market and holding forever, which is exactly the same as my investment strategy. I’ve bought index funds at age 18 that I plan on never selling!

vtsax vs vti pros and cons

VTSAX Pros

VTSAX has been a Vanguard staple and these are a few reasons investors rave over the fund!

  • Excellent Track Record
  • Minimizes Emotional Investing

Investors tend to forget during the excellent times that stock market returns are never guaranteed. It’s easy to expect 7-10% market returns (like clockwork) every year when you’ve never seen a bear market and gapping volatility.

VTSAX was launched in 2000, and it’s beaten 90% of actively managed funds throughout that time span. This all relates back to the concept of the zero-sum game and aiming for average returns.

Warren Buffett believes in index funds so much, he made a $1M bet that an S&P 500 index fund would outperform the best hedge funds over 10 years. He won!

Finally, VTSAX keeps me from making irrational decisions. I usually am very emotionally stable, but the fear of losing money can sometimes make me an irrational, emotional investor!

Ultimately though, this wonderful distinction in VTSAX vs VTI keeps me from selling on the market down days and riding the storm!

It’s been very difficult lately to keep invested, but I am so glad retail investors had this buffer with VTSAX!

VTSAX Cons

Nothing is perfect, and here are the biggest downsides.

  • No Intraday Trading
  • Higher Expense Ratio
  • $3,000 Minimum Investment

The largest limiting factor is the $3,000 minimum investment needed to secure fund access. Vanguard actually recommends beginning investors, with low capital balances, to use VTI.

Vanguard has an additional feature called “Admiral Shares” for investors with more disposable capital lying around.

For most of our index funds, Admiral Shares make investing more affordable for everyone by combining low expense ratios with low investment minimums.

On average, Vanguard Admiral Shares expense ratios are:

  • 41% lower than our standard Investor Share class.
  • 82% lower than the industry average.”

Fund AUM?

There’s an old saying “people vote with their pocketbooks”, so whichever fund has more assets under management surely is the superior vehicle (right?)!

Well, both funds share the same AUM of $822.4 because their underlying investment pool is grouped for liquidity purposes. Thus, you have the exact same investment regardless!

Which Do I Prefer?

The fund I currently recommend is VTSAX because I prefer to own an index fund over an ETF. Both pay quarterly dividends and have earned around a 10% return over the past 10 years.

If you invested $5,000 a year in this fund for 40 years, and it earned 10%, you would have an account balance totaling $2,212,963.

Keep in mind, these are arithmetic (not geometric) returns, and the past is definitely not indicative of the future. This is merely to get you excited about the prospect of investing and compounding returns!

Other Vanguard Funds

Debating VTSAX vs VTI is nonsense without mentioning the limited international exposure, but Vanguard offers VGTSX, which is their Vanguard Total International Stock Index Fund!

It is always intelligent, and rational, to diversify beyond one economy or currency. Singapore, New Zealand, and Australia also have very bright futures, and you would miss these gains by only investing in the US!

I have written several other Vanguard reviews comparing popular investment funds you can find below:

Finally, the Wellington Fund gives “Investors with a long-term time horizon who want growth and some income may wish to consider this fund.” The Wellington Fund is one of the few actively managed funds I endorse!

investment holdings

VTSAX vs VTI – Final Thoughts

“What’s the big difference between VTSAX vs VTI? They’re both passively managed funds with low costs and broad diversification?”

Really, there’s not a dramatic difference between the two products, but you want to make sure you select the investment vehicle that properly reflects you’re underlying liquidity demands.

VTSAX vs VTI FAQ

What’s the Difference between VTSAX vs VTI?

VTSAX is the index fund tracking the entire U.S. stock market, while VTI is the ETF version tracking the same index.

Is VTSAX or VTI better?

VTSAX and VTI are extremely comparable products and track the same index. Neither fund is guaranteed to be better, and we personally own both.

What are the Holdings of VTSAX and VTI?

VTSAX and VTI both track the U.S. total stock market index.

How do I Buy VTSAX or VTI?

You can buy VTSAX or VTI on Vanguard or any other popular brokerage.