Created in 1992 with the help of John “Jack” Bogle, Vanguards founder, the Vanguard Total Stock Market Index Fund was designed to provide low cost, broad diversification, and the possibility for tax efficiency. It seeks to track the performance of the CRSP US Total Market Index. This article dives into the three most popular – VTSAX vs VTSMX vs VTI and why we chose them for our portfolios.
Updated 5/23/2020: VTSMX is closed to new investors, VTSAX minimum investment was been lowered to $3000 in 2018. VTI expense ratio changed between 2018 and 2019.
Disclaimer: The information contained in this article is the opinion of the individual author based on personal observations and years of experience. The author has used its best efforts in preparing this content, and the information provided herein is provided “as is.” I am not a financial planner or financial advisor as a professional. These are things I have researched but your situation may be different so enlist the help of a credentialed advisor if you want investing advice.
VTSAX vs VTSMX vs VTI – What do these cost?
VTSAX
The Admiral shares class index fund. Provides the lowest expense ratio with the highest minimum investment.
- Expense Ratio: 0.04%
- Minimum Investment: $3,000
VTSMX
The investor shares class index fund. It comes in with a higher expense ratio but a lower minimum investment.
- Expense Ratio: 0.14%
- Minimum Investment: $3,000 CLOSED
VTI
This fund differs as it is not an index fund, but rather an Exchange Traded Fund, or ETF for short. This option allows a person to purchase an individual share and avoids the minimum investments of the index funds above.
- Expense Ratio: 0.03%
- Minimum Investment: Current stock price
VTSAX vs VTSMX vs VTI
| VTSAX | VTSMX (Closed) | VTI | |
|---|---|---|---|
| Expense Ratio | 0.04% | 0.14% | 0.03% |
| Minimum Investment | $3,000 | $3,000 | Current Stock Price |
| Fund Type | Mutual Fund | Mutual Fund | Exchange Traded Fund (ETF) |
With the minimum investment lowered for VTSAX, it has effectively replaced VTSMX, hence why Vanguard closed VTSMX to new investors. VTI instead of a index fund, it is an ETF. The ETF can incur a trading fee, Vanguard offers a commission-free trading system. If you invest with other stock brokers check to make sure you aren’t paying any fees.
VTSAX vs VTSMX vs VTI and their Historical Average Annual Returns
A look at the returns over various years and compared to the S&P 500.
| 1-yr | 3-yr | 5-yr | 10-yr | Since Inception | |
|---|---|---|---|---|---|
| VTSAX | 23.11% | 14.45% | 13.67% | 14.77% | 7.42% (11/13/2000) |
| VTSMX | 22.99% | 14.33% | 13.55% | 14.64% | 9.99% (04/27/1992) |
| VTI | 23.09% | 14.46% | 13.68% | 14.77% | 7.84% (05/24/2001) |
| S&P 500 | 21.47% | 12.80% | 12.02% | 12.66% | 6.26% (01/01/1957) |
Top Holdings
With a total of 3611 stocks making up Vanguard’s total stock market fund in 2019, a large chunk is comprised of their top holdings. The top 10 holdings account for 19.04% of the total assets in the index fund. These top holdings change, but here are companies that you will most likely see:
- Microsoft
- Apple Inc.
- Alphabet Inc.
- Amazon.com Inc.
- Facebook Inc.
- Berkshire Hathaway Inc.
- JP Morgan Chase & Co
- Johnson & Johnson
- Procter and Gamble
- Visa
Which Total Stock Market Fund Should You Choose?
When we were debating between VTSAX vs VTSMX vs VTI, we made our decision based on how large of an investment we could make.
<$3,000 investment
VTI – With the same expense ratio as VTSAX, this ETF was our pick until we could reach the minimum investment of $3K for VTSAX.
>$3,000 investmentVTSAX – Once we could meet the minimum investment requirement then this was the easiest approach to take. We don’t have to worry about buying individual shares of VTI and since VTSAX is a index fund we can buy fractional shares and know all our money is going straight towards collecting interest.
This is especially true since we house these in a 401k, IRA and HSA.
There are some caveats to this though to this and in some cases, ETF’s might be more tax efficient. Since this is about what we do, and not investment advice for you, dive into this further with a credentialed expert if it interests you.
Vanguard Total Stock Market Fund as a Single Fund Portfolio
There is rising popularity in holding 100% VTSAX or VTI for a portfolio. Some may choose to balance the risk out with bonds, but regardless the stock portion still remains as Vanguard’s Total Stock Fund. The logic behind this strategy is the largest US corporations that make up VTSAX have such a large market share and do business internationally that holding this “US” stock actually diversifies an investor globally.
These funds can be the building blocks to your retirement.
I’d rather bet on the U.S. This is a great nation with great places to invest. Great financial institutions, great government institutions, although a little bit faltering. – Jack Bogle
While foreign stocks may be cheaper, they are riskier, he says. Citing that U.S. companies are actually international companies since so much of their profits come from outside of the United States.
With this sentiment and the extremely low expense ratio, it makes sense to have this as our singular stock holding within our portfolio. Add on to the fact that there is no front-end/back-end sales load or distribution expenses makes this a very cheap fund. So whether we choose VTSAX vs VTSMX vs VTI, we’ve decided this is a great place to put our retirement for the future.
Those who wish to diversify further can choose to pick international holdings, but only you can decide for yourself what to do.
If you want to see all your investments in one place, I personally use and love Personal Capital. It’s an account aggregate tool that is completely free that gives an easy way to see your investments growing.
FAQ’s about VTSAX vs VTSMX vs VTI
What is VTSAX?
VTSAX stands for Vanguard Total Stock Market Index Fund. It is an index fund that you can invest in.
How do I buy VTSAX?
You can buy shares of VTSAX by signing up for an investing account with any brokerage. A few of the best low-fee brokerages we like are Fidelity, Vanguard, or Charles Schwab.
Does VTSAX pay dividends?
Yes, VTSAX pays dividends. You can find the dividend schedule here.
When does VTSAX pay dividends?
VTSAX dividends are paid at the end of each quarter of the year – the end of March, June, September, and December.
Is VTSAX a mutual fund?
Yes, VTSAX is a mutual fund. In fact, it is the largest mutual fund in the world!